After some last-minute scrambling, Congress agreed to extend the payroll tax cut of 2011 through the first two months of 2012. Originally set to expire on Dec. 31, 2011, the two-month extension provided by the Temporary Payroll Tax Cut Continuation of 2011 is a short-term solution — Congress will likely review extending the cut through 2012.

The original bill was passed in late 2010 as part of an effort to boost the sagging economy. It provided a one-year payroll tax cut of 2% or about $1,000 per worker on the theory that they would spend the extra money and stimulate the economy.

One difference in the new bill is a “recapture” clause that imposes a 2% tax on pay that exceeds $18,350 but is less than $110,100 (the 2012 Social Security cap) during the first two months of the extension.

Accountant Adam Shay, in Wilmington, N.C., says that most payroll software providers have made the changes needed to extend the 2011 tax cut through February. However, he says business owners should make sure they have the latest software updates. Owners who use a payroll service should ask the service provider if they are incorporating the change, and what they should know about the tax changes. - Nina Patel, Senior Editor, REMODELING