Social Security Tax Cut 2011: What Employers Need to Know
A new Social Security tax cut for 2011 will mean a net pay increase for millions of employees. This is part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The new tax cut allows for a 2 percent cut in payroll taxes for employees which will reduce the Social Security Tax from 6.2 to 4.2 percent. This reduced tax will not affect Social Security benefits.
The IRS released information that will help employers implement the new tax cuts.
What employers need to know:
• Social Security and Medicare employee tax rate for 2011 will be 4.2%.
• Social Security and Medicare employer tax rate remains the same at 6.2% with
the wage limit at $106,800 for 2011.
• The Medicare tax rate is 1.45% for both employees and employers in 2011. Medicare tax has no wage limit.
• Employers are asked to adjust their payroll systems for the new tax rate as soon as
possible but no later than January 31, 2011.
If there is Social Security tax over withheld during January, 2011, employers can make employee pay adjustments as soon as possible, but no later March 31, 2011.
• Employers will be responsible for withholding changes so employees won’t need
to do anything.
• Employees who typical pay additional taxes at the end of the year are encouraged
to review their withholdings annually and make adjustments as necessary.
• Specifics about the tax cuts, and new tax tables, are available at IRS Notice 1036.
Really!? Then why was my Disability check cut by $70 this month???