Originally Posted by
Busboy
I can't leave it at that...
The basic reason for the recapture is that the 2% break is only for money earned the first two months of the year. Soc. Sec withholdings are still stopped when the taxpayer reaches the $110,000 limit. Without the recapture, high income earners would possibly gain a tax advantage over those that do not earn over $110,000/yr.
Most easily explained by:
Taxpayer #1 earns $9167/mo. Jan - Feb he pays 4.2% = $770. Mar -Dec he pays 6.2% = $5684, for a yearly total of $6454.
Taxpayer #2 earns $55000/mo. Jan and Feb he pays 4.2% = $4620. Mar - Dec he pays nothing, for a yearly total of $4620.
So, the guy making $660,000/yr would be paying $1834 less than the guy making $110,000/yr. That of course, is a worst case scenario. But, I thought it would be easiest for the dittoheads to follow.
That's the reason. If they agree to a complete year of 4.2%. The recapture will be unnecessary.
So, when the Congress gets around to it this week or next they will pass some sort of extension of the payroll tax cut which will include the repeal of the 2% recapture provision. I can count on this happening. Sure thing. Take it to the bank. Don't even worry about the 2% tax liability for 2013. Congress always repeals taxes that they passed.
Remember, for a lot of us at FedEx, the January paycheck included any draft or volunteer we flew over peak. If this 2% thing remains in effect even if they pass the extension, some of us will have a significant amount taxed at 6.2% rather than at the 4.2% rate. I am standing by and watching the elected officials in Washington on this one. Probably going to have to dig into the fine print because the media doesn't care about or report this tiny detail.