I am posting this as reference for small business owners regarding 2011 payroll. As part of the Job Creation Act of 2010 the employees’ social security withholding rate was reduced from 6.2% to 4.2%. Please be aware that the Employer’s rate remains at 6.2%, so don’t just double your employee withholding amount when calculating your 941 payroll tax deposits.
Employee SS Withholding Rate: 4.2%
Employer SS Expense Rate: 6.2%
For those companies that process payroll internally please be sure to implement these changes by January 31. Any extra amounts withheld from employee checks due to late implementation must be reimbursed to employees by March 31, 2011.
IRS Notice 1036 contains important information for employers to review. I have provided links below both for Notice 1036 and Publication 15 (aka Circular E), the Employers Tax Guide.