As published in the Winter Park/Maitland Observer, Thursday Jan. 3, 2012 Edition Offers... Read More »
2011 Payroll Tax Relief
One of the more talked about provisions of the tax bill signed into law yesterday by President Obama is the temporary payroll tax reduction. WebCPA reports that the IRS has already issued guidance on the relief measure:
Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a 2 percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.
The new law also maintains the income-tax rates that have been in effect in recent years. Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011.
Notice 1036, released Friday, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), “Employer’s Tax Guide,” containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.
Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.
Publication 919, “How Do I Adjust My Tax Withholding?”, provides more information to workers on making changes to their tax withholding.