Tax Relief Act of 2010: Temporary Employee Payroll Cut for 2011

The Tax Relief Act  created  a payroll cut for 2011. Under current law employees pay a 6.2% Social Security tax on all wages earned up to $106,800 (in 2011) and self-employed individuals pay a 12.4% Social Security self-employment taxes of on all their self-employment income up to the same threshold. The bill provides a payroll/self-employment tax holiday during 2011 of two percentage points. As a result, employees will pay only 4.2% Social Security tax on wages and self-employment individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to the threshold.

If you have any questions about calculating employee payroll taxes, or tax planning in general, give us a call.

© 2010 Thomson Reuters/RIA. All rights reserved.