If taxpayers aren't jumping for joy over this year's Social Security tax reduction, it might be because they didn't even know that they were getting a tax break
If taxpayers aren't jumping for joy over this year's Social Security tax reduction, it might be because they didn't even know that they were getting a tax break.
According to an online survey of 2,037 visitors to the National Foundation for Credit Counseling's website, 46% of respondents were unaware that their Social Security taxes had been cut by nearly one-third.
When asked what they plan to do with the extra take-home pay, most responded: “This is news to me.”
The next-most-frequent responses were “catch up on past-due bills” (22%) and “increase payments to creditors” (20%).
“Since the tax cut results in a larger paycheck, it is puzzling why so many people remain unaware of this windfall of money,” NFCC spokeswoman Gail Cunningham said.
To be fair, the “windfall” is probably not making anyone feel like Bill Gates.
The break applies to the initial $106,800 that a taxpayer earns; at that level, it adds up to just $2,000 over the course of the year, or less than $38.50 a week.
Social Security taxes are being cut across the board to a rate of 4.2% of wages, from 6.2%, as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
The survey findings underscore the need for financial education, Ms. Cunningham said.
“One of the basic elements of personal finance is knowing how much you make, as this should be the basis for all spending decisions,” she said.
If the survey results highlight a lapse in financial literacy, they also suggest a failed effort to stimulate the economy.
Of those surveyed, 8% said they will save the money, and 3% said they will use it for retirement. But just 1% said they plan to spend it.
