Federal Income Tax Reductions Extended for Two Years

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 temporarily reduced income tax rates. Recently, Congress extended the tax rate reductions for two more years.

Under the Act, enacted on December 17, 2010, the income tax rates were temporarily reduced to a range of 10% to 35% (versus the previous 15% to 39.6%). The rates were scheduled to expire at the end of 2010. With the extension, the 10% to 35% range will remain for two more years.

The IRS has asked employers to adjust their systems as soon as possible but no later than January 31, 2011. Employees should see these changes in their paychecks by February 2011.