2011 Payroll Tax Relief

2011 Payroll Tax Relief

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One of the more talked about provisions of the tax bill signed into law yesterday by President Obama is the temporary payroll tax reduction. WebCPA reports that the IRS has already issued guidance on the relief measure:

Millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a 2 percentage point payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid. This reduced Social Security withholding will have no effect on the employee’s future Social Security benefits.

The new law also maintains the income-tax rates that have been in effect in recent years. Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011 but not later than Jan. 31, 2011.

Notice 1036, released Friday, contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), “Employer’s Tax Guide,” containing the extensive wage bracket tables that some employers use, will be available on IRS.gov in a few days.

Employers and payroll companies will handle the withholding changes, so workers typically won’t need to take any additional action, such as filling out a new W-4 withholding form.

Publication 919, “How Do I Adjust My Tax Withholding?”, provides more information to workers on making changes to their tax withholding.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida


  1. What about the employer match of Social Security? They match the 4.2% or do they have to remit 6.2%? No one seems to know.

  2. The payroll deduction is just for the employee’s share.

  3. What about self-employed persons who pay both halves of the tax?

  4. I need to look at this but I believe instead of 15.3% it will be 13.3%. Reduction only on the employee side of the payroll tax.

  5. Do not believe we will have a tax relief. It is a fiction. It is relief only for millioners, my taxes will increase at least $550, my salary is $37K, minus $5591 health insurance and FSA, minus $1850 401K, and even I will pay 2% less FICA, my Fed tax will cost me big reduction in earnings. Calculate your taxes and you will be surprised – unpleasently.

  6. Goldie,

    Only people who pay taxes get actual tax relief. Everyone else gets a handout.


  8. Goldie, we have a progressive tax system in the U.S. in which the rich already pay 35% taxes(under the Bush tax cuts), while over 40% of Americans pay no taxes. I’m not sure how liberals are so misinformed about millionaires getting all the tax breaks.

  9. Debi,

    Because there is an exception for people who type in all caps.

  10. Elaine,

    I’m not sure how conservatives are so misinformed about 40% of Americans paying no taxes.

    The famous 40% number you are thinking of is those Americans who aren’t paying additional taxes on April 15 because they already paid the taxes they owed through payroll deductions.

    Go troll somewhere else.

  11. Donald, it’s more than 40%. And we are talking about federal income taxes.

  12. Donald,

    If trolling means truth, I guess Elaine is trolling.
    It is acutally 47%: http://finance.yahoo.com/news/Nearly-half-of-US-households-apf-1105567323.html?x=0

    And notice that you the partisan is the one who is attacking regardless of your facts being wrong. But since when do facts matter, right smart guy?

  13. Your 941’s should report TAXABLE wages, which does not include contributions to a simple IRA. Reduce total wages paid by the amount of IRA contributions, to get net taxable wages. This gets reported on line 2 of Form 941.

  14. Greg,

    Actually she said pay no taxes which is not correct. In terms of Federal Income Tax the point is the taxes are offset as long as you qualify. Perhaps a more intelligent question is why we feel 47% (in 2009) require assistance.

    And by the way, the wealthy have the means to maximize their tax breaks through services and opportunities that most Americans can’t take advantage of either through lack of opportunity or the inability to divert funds elsewhere. The wealthy can use their money to build wealth, low income families cannot.

    The credits mentioned in your link where started by Bush and expanded by Obama. Sounds like the responsibility of both parties.

    And by the way, her post was the first to start throwing out labels and absolutes even though none of her statements are actually accurate. Sounds like trolling to me.