In IR-2010-24 and Notice 1036, the Internal Revenue Service (IRS) has released information to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables for employers to use during 2011. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (HR 4853) reduces the 2011 Social Security tax withholding rate for employees from 6.2% to 4.2% of wages paid. The new law also maintains the income-tax rates that have been in effect in recent years (the Bush-Era tax cuts).
The following instructions are contained in the information releases:
- 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 January 31, 2011. Notice 1036 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.
- Employers are to adjust their payroll systems as soon as possible, but not later than January 31, 2011.
- For any Social Security tax over-withheld during January 2011, employers should make an offsetting adjustment in workers’ pay, as soon as possible, but not later than March 31, 2011.
Publication 15, (Circular E), Employer’s Tax Guide, containing the extensive wage bracket tables that some employers use, will be available on http://www.IRS.gov shortly.
Employers should confirm as soon as possible that their payroll departments and/or payroll service providers have properly implemented the 2011 payroll changes.
If you should have any questions regarding payroll issues under the Tax Relief Act of 2010, please contact Ron Kramer at firstname.lastname@example.org or your local Schneider Downs Representative.
Schneider Downs provides accounting, tax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.