Payroll tax cut will boost employees’ take-home pay

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 two percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid. According to Todd Feltner, partner at HintonBurdick CPAs & Advisors, “This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.”


“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,” stated Feltner. For any Social Security tax over-withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2011.

“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,” said Feltner.

As always, however, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or large refund at the end of the year may want to consider submitting revised W-4 forms. For more information on adjusting withholding, taxpayers can consult IRS Publication 919, “How Do I Adjust My Tax Withholding?”

Free News Delivery by Email

Would you like to have the day's news stories delivered right to your inbox every evening? Enter your email below to start!

Posted in Business, News

Leave a Reply