As you probably have heard, the reduced payroll tax rate was recently extended through February 2012. (This continues the reduction of employees' Social Security tax withholding rate from 6.2% to 4.2% of wages paid through Feb. 29, 2012.)
However, the law also includes a "recapture" provision. This new provision applies only to employees who receive more than the Social Security wage base for the two-month period. Therefore, employees receiving more than $18,350 for January and February 2012 (calculated as two months of the 12-month amount of $110,100) will need to pay an additional amount equal to 2% of the wages received during the extension time. This "recapture tax" will be considered an add-on to income tax liability for higher wage earners and will be due in 2013 when the employee files his/her 2012 income tax return.
Additional info on the tax cut and the recapture provision are discussed on the IRS website: http://www.irs.gov/newsroom/article/0,,id=251650,00.html
