Meetings underway on payroll tax cut extension

Last December, the 4.2% social security tax rate that
workers pay on wages was extended through February 29, 2012.

Now a Congressional conference is being held to find a way
to extend the lower tax rate through the end of 2012. The sticking point is
lack of agreement between Republicans and Democrats on how to pay for the
extension, estimated to cost $100 billion.

House Democrats have expressed the hope that the conference
will be completed by the Presidents' Day recess scheduled for the week of
February 20. The legislation would extend the current 4.2% payroll tax rate
through December 31, extend unemployment insurance benefits, and prevent cuts
in reimbursements to Medicare providers.

Several legislators want to include tax extenders in the
payroll tax cut legislation. These "extenders" include such
provisions as the research and development credit for businesses, the optional
deduction for state and local sales taxes, and the $250 deduction for school
supplies purchased by teachers. Though these tax breaks appear to be
universally popular, finding a way to pay for them remains the big issue.

As you do your 2012 tax planning, keep the uncertain
legislative picture in mind.