The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, enacted in late 2010, included extensions to tax credits and exclusions affecting payroll for employers and employees. Additionally, the expiration of the “make work pay” tax credit, which came from the American Recovery and Reinvestment Act and gave workers a credit on their wages earned, was replaced with a payroll tax reduction and was a significant change.
The tax credit has been replaced with a 2 percent cut in Federal Insurance Contributions Act payroll withholdings during 2011 by employers for workers on wages up to $106,800 from 6.2 percent to 4.2 percent. This payroll reduction withholdings for employees, not employers, for Social Security taxes will result in larger take-home paychecks. Consequentially, the Internal Revenue Service has published new payroll and wage withholding tables for 2011 which have not changed, however, employers must implement the payroll withholding changes no later than Jan. 31, 2011.
Included in the tax extensions was a section, scheduled to expire in 2010 but is now extended until 2012, providing tax exclusions up to $5,250 for educational assistance from an employer. This tax exclusion from income includes assistance for tuition, fees, books and school supplies.
Another extension was of payroll and wage exclusions for compensation paid to grantees for services under two scholarship programs, the National Health Service Corps Scholarship Program and the Armed Forces Scholarship Program.
Other extensions include:
- Employer-provided child care credit
- Tax-free reimbursement for employer-provided mass transit and parking
- Wage credit for active military reservists
- Extension of the employer adoption tax credit
- Extension of the Work Opportunity Tax Credit
