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IRS unveils rules for payroll tax cut

NEWS IN BRIEF — Posted Jan. 10, 2011

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The Internal Revenue Service on Dec. 17, 2010, issued instructions for employers to implement the 2011 cut in payroll taxes recently passed by Congress and signed into law by President Obama.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 lowered the Social Security withholding rate from 6.2% to 4.2%. The reduced withholding has no impact on an employee's future Social Security benefits.

Employers need to start using the new withholding tables no later than Jan. 31. If too much is withheld at the beginning of the year as employers implement this change, adjustments can be made to subsequent paychecks. The IRS' Notice 1036 includes the updated tax withholding tables (link).

Note: This item originally appeared at http://www.ama-assn.org/amednews/2011/01/10/bibf0110.htm.

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