Posted on December 23, 2010

Congress Passes Bush Tax-Cut Extension

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed last Friday, December 17, by President Obama. Paycor has updated all programming and services to comply with this legislation. The following items will take effect for all processed payrolls starting with checks dated 1/1/2011.

Payroll tax cut that will reduce the employee Social Security withholding rate by 2.0% (from 6.2% to 4.2%) for one year starting with payrolls dated 1/1/2011.

2010
Employer SS $100 x 6.2% = $6.20
Employee SS $100 x 6.2% = $6.20

2011
Employer SS $100 x 6.2% = $6.20
Employee SS $100 x 4.2% = $4.20

Income tax rates will remain at their current levels of 10, 15, 25, 28, 33% and 35% based on income levels. These rates will remain in effect for two tax years, 2011 and 2012.

Additionally, the Making Work Pay Credit will expire 12/31/2010. While most employees will see an increase in their net pay because of the change in the social security rate, their federal withholding should increase slightly because of this credit expiration.

For more information, visit http://www.irs.gov/pub/newsroom/notice_1036.pdf