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2011 Employee Tax Changes - Making Work Pay Tax Credit
2011 Employee Tax Changes - Making Work Pay Tax Credit
Congress recently ended the "Making Work Pay" tax credit and replaced it with a temporary payroll tax reduction for employees. Your employees may be asking, "Why was my paycheck different this month?" Below we have summarized the new tax changes that took affect in 2011 to help clarify the questions your employees may have. The Internal Revenue Service has already published new wage withholding tables for 2011, which Employer Flexible has implemented and applied to all wages paid in 2011. All employers are required to implement this new tax table no later than Jan. 31, 2011. The new wage tables reflect a 2 percent cut (from 6.2 percent to 4.2 percent) in the FICA withholdings during 2011 by employers for workers on earnings up to $106,800. This reduces how much is withheld for Social Security taxes and will result in a larger take-home payout for employees. The payroll tax cut, unlike the credit, does not exclude some individuals based on their earnings and has the potential of significantly higher benefits (with a maximum payroll tax reduction of $2,136 on wages at or above the $106,800 level as compared to a maximum available $800 “Making Work Pay” credit for married couples filing jointly ($400 for single individuals). No action on your part is necessary to receive the tax reduction. Our Payroll Team has processed the changes using the new withholding tables. Employees may consider reassessing their current withholding W-4 information because the tax cut will mean increased tax liability at the end of the year. The IRS maintains a calculator at the web address below to help your employees assess the impact of this new rule on your year-end taxes and determine if you will need to submit a revised W-4. IRS Withholding Calculator Please contact your Employer Flexible team with questions you or your employees may have regarding these changes. |
