News & Announcements

Important Payroll Tax Changes in 2011

January 10, 2011

2% Payroll Tax Reduction

The “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” signed into law on December 17, 2010, provides for a one-year payroll tax reduction. Specifically, the employee’s portion of the Social Security payroll tax on their wages has been lowered to 4.2%. The employer’s share of social security tax is not affected; it stays at 6.2%. As it currently stands, this tax break applies for one year, 2011. This payroll tax reduction will not affect the worker’s future Social Security benefits because benefits are based on lifetime earnings, not the amount of tax paid by the worker into the Social Security system.

Due to the late enactment of this new tax law, the IRS is requesting that employers adjust their payroll systems as soon as possible, but no later than January 31, 2011. For any Social Security tax over withheld during January, the IRS is allowing employers to make an offsetting adjustment in workers’ pay as soon as possible, but no later than March 31, 2011. Please note that this adjustment would not be subject to any payroll taxes.

Helpful Links:

http://www.irs.gov/pub/newsroom/notice_1036.pdf
Notice 1036 contains the early release copies of the 2011 percentage method for income tax withholding tables, the lower social security withholding rate, and other related information.

http://www.irs.gov/pub/irs-pdf/p15.pdf
Publication 15 (Circular E) Employer’s Tax Guide, for 2011 is now available. This annual publication provides definitions, rules, regulations, and responsibilities for all employers with respect to employment taxes.

Electronic Payment of Payroll Taxes

Effective January 1, 2011, the Internal Revenue Service will no longer accept Form 8109 (FTD Coupons) when making your Federal Tax Payments.

http://www.irs.gov/pub/irs-pdf/p966.pdf
All Federal Tax Payments must be made through the Electronic Federal Tax Payment System (EFTPS) program. This can be done over the phone or “online” via the internet, both payment methods are interchangeable. This system is a free, secure service available from the U.S. Department of the Treasury. (Also refer to IRS Publication 966.)

Applicable business tax payments:
Payroll tax deposits
Remittance of income and excise taxes

In order to log into the system, every user must have a secure internet browser with 128-bit encryption in order to access the site. To log into the system, the user must be enrolled and have the following information: (1.) Taxpayer Identification Number (EIN or SSN), (2.) EFTPS Personal Identification Number (PIN), (3.) Internet Password.

Enrollment & PIN Assignment

The IRS has pre-enrolled some businesses. If you have received a pre-enrollment package from the IRS with a PIN number, please be sure to follow the instructions and complete the enrollment process as soon as possible. Your internet password for access to the EFTPS will be assigned during this process.

If you have not received a pre-enrollment package, you will need to register with the EFTPS via their website at www.eftps.gov or by calling EFTPS Customer Service at 1-800-555-4477. There is a 2-4 week waiting period to receive your PIN along with the additional instructions. If you are enrolling after December 31, 2011, you will still be required to make your payments electronically.

http://www.irs.gov/efile/article/0,,id=97400,00.html
The IRS website provides several electronic payment options if you have not yet enrolled. (IRS Electronic Payment Options link:

EXCEPTION: Employers who have $2,500 or less in quarterly payroll tax liability for 941 returns and who pay this liability when filing the return.

 

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