An IRS news release said millions of workers will see their take-home pay rise during 2011 because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 provides a payroll tax cut for employees, reducing their Social Security tax withholding rate from 6.2% to 4.2% of wages paid.
The IRS said it recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. “For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than January 31, 2011,” the IRS said.
Notice 1036 contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Notice 1036 is at http://www.irs.gov/pub/newsroom/notice_1036.pdf.
For any Social Security tax overwithheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible, but not later than March 31, 2011, IRS officials said.