No change is required in your current payroll software for FICA withholding. As we noted in a previous correspondence the FICA rate was to return to 6.2% for employee withholding on March 1st unless congress did something. They did, the rate reduction is extended till 12-31-12. Official release is below.
Payroll Tax Cut Extended to the End of 2012; Revised Payroll Tax Form Now Available to Employers
IR-2012-27, Feb. 23, 2012
WASHINGTON – The Internal Revenue Service today released revised Form 941 enabling employers to properly report the newly-extended payroll tax cut benefiting nearly 160 million workers.
Under the Middle Class Tax Relief and Job Creation Act of 2012, enacted February 22, 2012, workers will continue to receive larger paychecks for the rest of this year based on a lower social security tax withholding rate of 4.2 percent, which is two percentage points less than the 6.2 percent rate in effect prior to 2011. The reduced rate, originally in effect for all of 2011, was extended through the end of February by the Temporary Payroll Tax Cut Continuation Act of 2011, enacted December 23, 2011.
Self-employed individuals will also benefit from a comparable rate reduction in the social security portion of the self-employment tax from 12.4% to 10.4%. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.
The new law also repeals the two-percent recapture tax included in the December legislation that effectively capped at $18,350 the amount of wages eligible for the payroll tax cut. As a result, the now repealed recapture tax does not apply. The IRS will issue additional guidance, as needed, to implement the newly-extended payroll tax cut, and any further updates will be posted on IRS.gov.