Employee Social Security Tax Reduced 2% in 2011
In attempt to boost taxpayer income - and thus encourage spending - the new Tax Relief Act, signed by President Obama in December 2010, reduces withholding for employees. This reduction is an attempt to stimulate consumer spending and get the economy back on track.
This legislation includes a 2% reduction in the employee Social Security (OASDI) tax in FICA taxes. For an employee earning $50,000 in gross income, this means an additional $1,000 available in 2011. This cut in Social Security tax is only effective for 2011 (unless it's extended) and it does not reduce your employer contribution to FICA taxes.
The law requires employers to make this change in payroll withholding as soon as possible, but no later than January 31, 2011.
If you have already given 2011 paychecks to employees, you must give them a refund as soon as possible, but no later than March 31, 2011.
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