Eakins & Company, P.C.
407 North Wilcox St Phone 303-688-0375
Castle Rock, CO 80104 Fax 303-688-0175
Social Security and Medicare Tax for 2011
The FICA (Social Security) tax rate will NOT remain the same for 2011 as a result of the tax bill just signed. On December 17, 2010, Congress approved a cut in payroll taxes for 2011. Workers will see their take-home pay rise during 2011 because the tax relief provides a two percentage point payroll tax cut for employees.
The employee tax rate for social security is 4.2% starting January 1, 2011. The employer rate for social security remains unchanged at 6.2%. The 2011 social security wage base is $106,800, the Medicare tax rate is 1.45% each for employers and employees, both unchanged from 2010. There is no wage base limit for Medicare tax. The result of this change will impact the 941 calculation. (Remember that all payments must be made electronically via EFTPS.)
Employers should implement the 4.2% employee social security tax rate as soon as possible, but not later than January 31, 2011. If there is any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.
Employers and payroll companies will handle the withholding changes. Employees do not need to submit another W-4. However, the IRS urges workers to review their withholding every year and, if necessary, fill out a new W-4 and give it to their employer. For example, individuals and couples with multiple jobs, people who are having children, getting married, getting divorced or buying a home, and those who typically wind up with a balance due or a large refund at the end of the year may want to consider submitting revised W-4 Forms.
For more information and the 2011 federal withholding tables, Publication 15 (Circular E) will be posted on irs.gov in December 2010.
Beginning 2011, the IRS is requiring 941 (payroll withholding) payments to be made through the EFTPS system (Electronic Federal Tax Payment System). They will no longer accept payments made through your bank with a coupon.
If you are a monthly or weekly depositor who has been writing checks and taking them to the bank, you will now need to register for EFTPS. This will allow you to authorize the payment to be withdrawn directly from the checking or savings account you designate. No checks to write. No extra trips to the bank. You control how much and when the payment will be made.
The process for registering is easy. Click on EFTPS Online Enrollment to complete the process. You will need your tax ID number handy, the exact spelling of your name as it appears on your IRS tax documents, and your financial institution information. Select Business Enrollment under the Enrollment tab. Complete the requested information and click Submit. Within 10-15 days you will receive your EFTPS confirmation package. You will have the option of using 2 payment methods interchangeably: Internet or phone.