By Sheila Emory
On February 22nd, President Obama signed the payroll tax cut extension into law. This extension affects nearly 160 million workers by continuing to keep the social security withholding rate at 4.2%, instead of the 6.2% in effect prior to 2011. This extension is set to expire on December 31, 2012.
Those who are self-employed will also see a reduction in their social security withholding from 12.4% to 10.4%, up to a threshold of $110,100 of wages and net self-employment income.
The new lower rate will have no effect on workers’ future social security benefits.