20 December 2010
After 2 years, the Making Work Pay tax credit is due to expire. The end of 2010 is the conclusion of the Making Work Pay credit. Joint tax filers received a maximum credit of $800 and single filers had a max credit of $400.

Complying with the New Payroll Tax Cut

The Obama Tax Cuts instituted a one-year reduction in the Social Security tax for employees, from 6.2% to 4.2%. This means the single taxpayer making $50,000 will save $1,000 on taxes in 2011. This reduction in Social Security tax will not impact the employee's future Social Security benefits.

But it's up to business owners to adjust their employees' withholdings. They must do so as soon as possible in January 2011, but no later than January 31, 2011. Notice 136 lists the new amounts you should withhold from employees' paychecks.

Caution: If you withhold too much Social Security tax during January, you will need to make an offsetting adjustment in your employees' pay as soon as possible and no later than March 31, 2011. Ask us for more details.

Self-Employed Individuals See a Reduction, Too. Those who own businesses with no other employees should also be aware of their new Social Security withholding amount, which fell from 12.4% to 10.4%. This combined with the 2.9% Medicare rate brings the total of the 2011 & 2012 self-employment tax rate to 13.3%.
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Topic: Advice