Effective Jan. 1, 2011 new federal legislation reduces the social security taxes withheld from employees from 6.2% to 4.2% for calendar year 2011.
Also, effective Dec. 31, 2010 The American Reinvestment and Recovery Act of 2009 (stimulus bill) which included “The Making Work Pay” tax credit ended.
The federal tax tables will be reverted back to the 2008 brackets with changes made within each wage bracket effective Jan. 1, 2011. Therefore, while the amount of social security tax will decrease, the majority of employees will see an increase in federal tax withholdings.
For monthly paid employees, you will see a decrease in the social security taxes beginning with the paycheck dated Jan. 31, 2011. The federal tax withholding change will be effective with the paychecks dated Feb. 28, 2011.
For the biweekly paid employees, you will see a decrease in the social security taxes on the paycheck dated Feb. 4, 2011. The paycheck dated Feb. 4, 2011, will also refund the difference between the 6.2% and the 4.2% for the first two paychecks of 2011. The federal tax withholding change will be effective for the paycheck dated Feb. 4, 2011.