In the early hours of 2013, Congress enacted the American Taxpayer Relief Act of 2012 (ATRA or the "Act") in order to avoid the so-called "fiscal cliff." We've extracted provisions from the 157-page Act that are of most relevance to churches and church employees.
The American Taxpayer Relief Act of 2012 has two major features—an increase in the tax rates paid by the wealthiest Americans, and an extension of several tax benefits that were scheduled to expire at the end of 2011 or 2012.
Some expiring tax benefits were not extended. Most notably, Congress chose not to extend the so-called payroll tax "holiday" that reduced the Social Security taxes for both employees and the self-employed for the past two years. This results in a tax increase for three out of every four Americans in 2013.
Expiration of the reduction in Social Security taxes. Prior to 2011, employees paid a 6.2 percent Social Security tax on all wages earned up to the annual "wage base" and self-employed individuals paid a 12.4 percent Social Security self-employment tax on all of their self-employment income up to the same threshold.