IRS Releases 2011 Withholding Details

The IRS
released details on withholding for 2011, including a payroll tax cut
for employees. Employers can view early release copies of percentage
method tables for income tax withholding in 2011 on the IRS website.

The
Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act
of 2010 provides a two percentage point payroll tax cut for employees,
reducing workers’ Social Security tax withholding rate from 6.2 percent
to 4.2 percent of wages paid.

The law also maintains the income-tax rates that have been in effect in recent years.

The IRS is urging employers to start using the new withholding tables
and reducing the amount of Social Security tax withheld as soon as
possible in 2011 but not later than Jan. 31, 2011. 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. Publication 15, (Circular E),
Employer’s Tax Guide, containing the extensive wage bracket tables that
some employers use, will be available on IRS.gov soon.

For 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,
so workers typically won’t need to take any additional action, such as
filling out a new W-4 withholding form.