The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, which passed in late 2010, brought many changes for businesses. One of the key changes included in this legislation, affects how payroll withholding should be calculated on W-2 wages in 2011.
During 2011, Social Security Tax will be withheld from an employee’s wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. Remember that this legislation does not affect employer’s matching contributions, so their rate remains 6.2%.
In a similar fashion, self-employed individuals (subject to SE Tax) also have a reduced rate to match the reduction in 2011. The total tax rate on net self-employment income for 2011 is 13.3% on the first $106,800 of net self-employed earnings (down from 15.3%). Remember that self-employed individuals pay Medicare Tax at a flat rate beyond this income level at a flat 2.9%.
In addition, the credit for one-half of self-employment tax has been modified to reflect the related change.
To view the adjusted credit please visit the IRS website, or click here.
During 2011, Social Security Tax will be withheld from an employee’s wages at the rate of 4.2% (down from 6.2%) up to the social security wage limit of $106,800. Remember that this legislation does not affect employer’s matching contributions, so their rate remains 6.2%.
In a similar fashion, self-employed individuals (subject to SE Tax) also have a reduced rate to match the reduction in 2011. The total tax rate on net self-employment income for 2011 is 13.3% on the first $106,800 of net self-employed earnings (down from 15.3%). Remember that self-employed individuals pay Medicare Tax at a flat rate beyond this income level at a flat 2.9%.
In addition, the credit for one-half of self-employment tax has been modified to reflect the related change.
To view the adjusted credit please visit the IRS website, or click here.
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