In December 2010, President Obama signed a new tax bill, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Included in this tax bill was a stimulus measure for 2011, commonly referred to as the “Payroll Tax Holiday.” The Payroll Tax Holiday is a temporary one (1) year decrease in the employee’s portion of the social security tax that is deducted from the employee’s pay. Normally, an employee contributes 6.2% of his/her gross pay to Social Security. With the application of the Payroll Tax Holiday, the employee portion of the tax is reduced by 2.0% to 4.2%. Sadly, employers do not receive the same reduction. Thus, employers for 2011 continue to contribute 6.2% of the gross pay to Social Security. Because the tax law was passed with little time to implement changes before the start of 2011, the Internal Revenue Service advises employers to make adjustments to their employee’s paychecks “as soon as possible but not later than March 31st.”
Were you aware of the change in Social Security taxes for your employees? If your answer is “No”, then you are not alone. For more information or assistance with making your business compliant with this law, then contact Ronnie Gipson at (415) 655-6820 or via email at gipson@higagipsonllp.com.
The law firm of Higa & Gipson, LLP would like to extend its gratitude to Alison Heineman, with Keeping Your Balance- Bookkeeping, Tax & Payroll Services. Ms. Heineman provided the particulars of the new tax law’s implication for employers. Ms. Heineman can be reached at (415) 399-9844.
