Tax Relief Act Of 2010 - How The 2011 Social Security Tax Cut Affects Small Businesses And Employees
Tax Relief Act Of 2010 - How The 2011 Social Security Tax Cut Affects Small Businesses And Employees
Did that the federal authorities is giving truely all wage earners and self-hired parents a 2% raise for 2011?
Thanks to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (aka Tax Relief Act of 2010), which President Obama signed into law on December 17, 2010, worker wages and/or self-employment income up to $106,800 might be subject to Social Security taxes of 4.2% a 2% drop from the 6.2% price that's been in impact for many years.
Here's how this new regulation affects employees, the self-hired, and employers.
Employees: An worker with W-2 compensation of $50,000 will see a reduction in Social Security tax withholdings of $1,000 over the course of 2011. If your W-2 repayment is $one hundred,000, you'll get a further $2,000 to your take-home pay. The employee Social Security tax of four.2% applies to the primary $106,800 of gross pay, so in case you make more than that, your tax reduce is constrained to $2,136 ($106,800 x 2%). Keep in mind that you'll get this tax cut via lower withholdings and higher net pay in every paycheck for the duration of the year. At the $50,000 annual wage level, this amounts to approximately $19/week.
Self-Employed: The self-hired have the unfortunate honor of paying each the worker and agency percentage of Social Security taxes through self-employment tax. Normally, instead of 6.2%, you pay 12.4%. The 2011 law reduces your Social Security tax by way of 2%, so now you may pay 10.4% instead of 12.Four%. End result: you get the same tax wreck as an worker.
Employers: The agency has been required to pay 6.2% in Social Security taxes for decades, i.E. The identical amount as the employee. Under the brand new regulation, only the employee's percentage of Social Security tax is reduced through 2%. The agency's proportion remains the equal at 6.2%. Sorry! But this 2011 regulation does affect the employer, because the enterprise should change the payroll withholding calculations for the employee's decreased charge of 4.2%. Your payroll software program must take care of this, and also you must begin the use of the new price of four.2% effective January 1, 2011.
The IRS realizes that the late enactment of the Tax Relief Act of 2010 should make it difficult for employers to alternate their payroll gadget so quickly. So the IRS is calling employers to adjust their payroll systems as soon as possible, but no longer later than Jan. 31, 2011. If an organization finally ends up withholding an excessive amount of Social Security tax in January, the company ought to make an offsetting adjustment in people' pay as quickly as viable but no later than March 31, 2011.
Did that the federal authorities is giving truely all wage earners and self-hired parents a 2% raise for 2011?
Thanks to the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (aka Tax Relief Act of 2010), which President Obama signed into law on December 17, 2010, worker wages and/or self-employment income up to $106,800 might be subject to Social Security taxes of 4.2% a 2% drop from the 6.2% price that's been in impact for many years.
Here's how this new regulation affects employees, the self-hired, and employers.
Employees: An worker with W-2 compensation of $50,000 will see a reduction in Social Security tax withholdings of $1,000 over the course of 2011. If your W-2 repayment is $one hundred,000, you'll get a further $2,000 to your take-home pay. The employee Social Security tax of four.2% applies to the primary $106,800 of gross pay, so in case you make more than that, your tax reduce is constrained to $2,136 ($106,800 x 2%). Keep in mind that you'll get this tax cut via lower withholdings and higher net pay in every paycheck for the duration of the year. At the $50,000 annual wage level, this amounts to approximately $19/week.
Self-Employed: The self-hired have the unfortunate honor of paying each the worker and agency percentage of Social Security taxes through self-employment tax. Normally, instead of 6.2%, you pay 12.4%. The 2011 law reduces your Social Security tax by way of 2%, so now you may pay 10.4% instead of 12.Four%. End result: you get the same tax wreck as an worker.
Employers: The agency has been required to pay 6.2% in Social Security taxes for decades, i.E. The identical amount as the employee. Under the brand new regulation, only the employee's percentage of Social Security tax is reduced through 2%. The agency's proportion remains the equal at 6.2%. Sorry! But this 2011 regulation does affect the employer, because the enterprise should change the payroll withholding calculations for the employee's decreased charge of 4.2%. Your payroll software program must take care of this, and also you must begin the use of the new price of four.2% effective January 1, 2011.
The IRS realizes that the late enactment of the Tax Relief Act of 2010 should make it difficult for employers to alternate their payroll gadget so quickly. So the IRS is calling employers to adjust their payroll systems as soon as possible, but no longer later than Jan. 31, 2011. If an organization finally ends up withholding an excessive amount of Social Security tax in January, the company ought to make an offsetting adjustment in people' pay as quickly as viable but no later than March 31, 2011.
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