written by Patti Stoner

Patti Stoner head shot

With the recently enacted payroll tax cut for employees beginning in January 2011, the IRS has issued some guidelines for this 2.0% reduction in social security tax for your employees. It provides some relief for you, as an employer, so that your payroll software provider or services provider has time to make the necessary programming changes for this new law.

IRS’ notice 1036 (click here to read the full notice) allows employers to use their 2010 withholding tax tables until you can implement the 2011 withholding tables. The employee tax rate for social security for 2011 is 4.2% (down from 6.2% in 2010). The employer’s tax rate for social security remains unchanged at 6.2%. Employers should implement the 4.2% employee social security tax rate as soon as possible, but not later than January 31, 2011. After implementing the new 4.2% rate, employers should make an offsetting adjustment in a subsequent pay period to correct any overwithholding of social security tax as soon as possible, but not later than March 31, 2011.

If you have further questions, please call your client administrator or our Small Business Services staff for assistance.