Under the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010 (H.R. 4853), as of January 1, 2011 the amount of Social Security withheld from an employee’s paycheck has changed. For 2011, 4.2% is withheld from the employee’s paycheck (down from 6.2%). The employer share of Social Security remains at 6.2%. Please see the illustration below.

Jan’s Paycheck:
Gross:                    $ 1000.00
SS:                        ($     42.00)
Medicare:              ($     14.50)
Federal                 ($   100.00)
State:                    ($     75.00)

The paycheck to Jan should be $768.50.

The Federal Payroll Deposit (which must now be done over the phone or online as Form 8109 deposits through banks will no longer be accepted) should be as follows:

Employer Social Security (6.2%)           $  62.00
Employee Social Security (4.2%)          $  42.00
Employer Medicare (1.45%)                  $  14.50
Employee Medicare (1.45%)                 $  14.50
Federal Withholding                              $100.00

Total Deposit                  $233.00

If you have already paid your employees before updating the Social Security withholding, you are required to make up for any underpayments. The new rate must be in place by January 31, 2011 and all underpayments must be reimbursed to employees through paychecks by March 31, 2011. If you use payroll software (such as Quickbooks), it may make the changes automatically, but we recommend that you verify that the correct amounts of Social Security are being withheld.

If you have any questions regarding any of these changes, please contact our office.