The 2011 withholding tables reveal the continuance of the lower tax rates first ratified by the Economic Growth and Tax Relief Reconciliation Act in 2001. They also reflect the lower Social Security tax rate for employees (4.2%), instituted for 2011 by the Tax Relief act. Employers are instructed to execute the new lower 4.2% Social Security tax rate as soon as possible, and not later than Jan. 31, 2011. They are also instructed to make an offsetting adjustment in a later pay period—but no later than March 31—to correct for any overwithholding of Social Security tax that may have occurred at the start of the year from a failure to adjust for the 4.2% .
Employers are reminded of two expired tax items that have not been extended by the Tax Relief bill. There is no adjustment for the Making Work Pay Credit in the 2011 tables, as it expires at the end of 2010, and any additional withholding adjustment for pensions will cease. The ability to elect to receive advanced earned income credit payments also expires at the end of 2010.
KEY POINTS
Must implement new tables no later than 1/31/2011- see the attached Notice 1036 for details.
Social Security wage limits – no change from 2010 base limit of $106,800.
Medicare – no wage base limit to Medicare withheld.
Making work pay credit expires 12/31/2010.
There will no longer be any Earned Income Credit available in advance as a payroll adjustment.
Follow the attached link to view the compete IRS Notice 1036. http://www.irs.gov/pub/irs-pdf/n1036.pdf
For more information on how this will affect you and your business, please don’t hesitate to contact either of our offices. We will be happy to discuss exactly what these changes will mean for you.
Dover, Delaware Ocean City, Maryland
302-674-4305 410-213-8700
