Archive for September, 2011

Payroll Tax Rules for 2011

Friday, September 16th, 2011

The exclusive purpose for the information which is provided from this website is to disseminate  information, and not to provide tax advice.

The information below is related to the rules for your 2011 payroll tax reporting.  It will also provide a basis for comparison following Present Obama’s speech, which included several payroll tax law recommendations under the auspices of “The American Jobs Act of 2011″.  The President’s proposals have been presented to the U.S. Congress for review.   The final changes which could be enacted later this year or in 2012  may legislate additional changes to the existing payroll tax laws.  The overall strategy from the  White House recommendations is to reduce the employee component of payroll taxes to 1) provide more discretionary funds for employees and stimulate consumer spending (to expand our economy), and 2) reduce the payroll tax impact to employers to stimulate employment growth.   Updates for this article will be  provided when (if) any of these changes actually become Federal tax laws:

 □    Federal Income Taxes – in December 2011 Congress extended the expiration date for the Federal income tax rate structure which was enacted during the Bush administration.  This tax rate structure was due to expire on December 31, 2010.  Unless changed by Congress, the extended tax rates will not expire until December 31, 2013.  Page three of this hyperlink provides the tax table rate by filing status  http://www.billseabrookecpa.com/resources/2011merrilllynchtaxplanningdocument.pdf;

 □    Social Security Taxes –  in 2010 the Social Security taxes were 6.2% of the employee’s social security wages.  Employers are required to make an equal contribution (match) to the employee’s social security retirement plan.  In 2010 the total social security taxes were 12.4%.  However, for all of calendar year 2011, the employee component was reduced to 4.2% while the employer contribution remains at 6.2%.  See lines 5a-5c of the Federal Form 941 form (http://www.irs.gov/pub/irs-pdf/f941.pdf).  For 2011 the maximum annual wages which are subject to social security taxes remains at $106,800.00;

 □    Medicare Taxes – both the employee and employer match tax rate remains at 1.45% each.  Therefore, the total payroll tax rate for Medicare is still 2.9%.  There is no statutory maximum salary base limitation for Medicare taxes. 

 □    Payroll Tax Deposits – Beginning January 1, 2011, employers must now use an electronic funds transfer system for all Federal tax deposits (such as deposits for employment taxes, excise taxes, and corporate income taxes).   Forms 8109 and 8109-B, (the Federal Tax Deposit Coupon), cannot be used for this purpose after December 31, 2010.  Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS).   Employers who do not want to use the EFTPS can arrange to have their tax professional,  financial institution, payroll service,  or other trusted third party make these tax deposits on their behalf.  Also, employers may arrange to have their financial institution initiate a same-day wire payment on their behalf.   The EFTPS is a free service which is provided by the Department of Treasury.   There may be fees and additional costs if these same services are provided by a tax professional,  financial institution,  payroll service, or other third party.

To obtain more information about EFTPS or to enroll in EFTPS, visit www.eftps.gov or call 1-800-555-4477.