The likely expiration of U.S. payroll tax legislation
that afforded taxpayers a 2 percent payroll tax cut, from 6.2 percent to 4.2 percent, has been in the news of late due to the impending "fiscal cliff," when a number of tax cuts, federal spending reductions and other provisions are set to expire at the end of the year.
At the tail end of 2011, lawmakers passed the two-month Temporary Payroll Tax Cut Continuation Act in the nick of time to prevent last year's allowance from expiring. In February, Congress extended the decreased payroll tax cut rate through the end of 2012.
However, the payroll tax holiday extension was not the only U.S. payroll legislation
development seen in 2012. The beginning of the year saw a number of
federal payroll tax changes take effect, including:Fringe benefits
At the beginning of 2012, employees were permitted to exclude as much as $240 per month from their taxable income for qualified parking expenses, up from $230 the previous year. Meanwhile, tax-free exclusions for the combined value of transit passes and transportation in a commuter highway vehicle were reduced from $230 per month to $125 per month, and the standard mileage rate for computing the deductible cost of operating a car was set at 55.5 cents per mile.
A $12,170 limit was also imposed upon the amount allowed to be excluded from an employee's gross income in connection with the employee's adoption of a child.Work opportunity tax credit
Under the work opportunity tax credit (WOTC), employers who hired qualified veterans in 2012 had the chance to receive income tax credits.Federal minimum wage
Although the federal minimum wage rate remained at $7.25 per hour in 2012, legislation was introduced at the end of July that proposed a $2.55 federal minimum wage increase to $9.80 an hour within the next three years. Proponents of the change argued that the wage needed to keep pace with inflation, while skeptics raised questions about how a higher minimum wage would affect the stability of the recovering economy. The bill was referred to committee
and has not yet made it to the Senate.