Social Security Tax Cut 2011

The Social Security tax cut for 2011 is due to the 2010 Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act. This new tax cut will leave a 2% cut in payroll taxes for employees and reduces 2% of the employee contribution to Social Security tax. Please note from IRS Notice 1036:

1. Employer tax rate for Medicare and Social Security will remain 6.2% with a wage limit of $106,800

2. Employee tax rate for Medicare and Social Security will be 4.2%

3. Medicare will be 1.45% for employers and employees with no wage limit

4. Employers should update their systems to reflect these new changes by January 31, 2011

5. Employees should be reimbursed any tax overage made during the transition by March 31, 2011

6. Everyone should review their tax withholdings to make any necessary adjustments

Source: IRS.gov