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Not so long ago when it looked like the Bush tax cuts might expire, we were all worrying about the possibility of shrinking paychecks. Now we’re worrying if our employers can get the new withholding tables in place to make sure our paydays will be bigger. I’m Claes Bell with the Bankrate.com personal finance minute.
A 2 percent payroll tax cut is part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The payroll tax is the portion that goes to pay for Social Security.
For the next few days, that withholding is 6.2 percent of your paycheck.
But on January 1, 2011, the amount withheld drops to 4.2 percent of your income earned next year, up to $106,800.
So the IRS is giving workplaces some time to take care of the new withholding. The agency has instructed employers to implement them “as soon as possible in 2011.”
And if an employer does end up withholding the payroll tax from workers at the higher 6.2 percent rate, the IRS says the employers must reimburse the workers the difference “not later than March 31, 2011.”
So be sure to check your first paycheck next month and if you have any questions about the amount, check with your boss about whether (or when) the new, lower payroll withholding tax is in place.
For more on this and other personal finance issues, visit bankrate.com. I’m Claes Bell.