Tax Relief: 2011 Paychecks Will Be Bigger…Eventually
The federal government is giving you a raise – that is, they are taking less out of your paycheck for social security, so the money you actually get from your paycheck will be more. The tax bill Congress recently enacted includes a reduction in the employee portion contributed to the social security fund from 6.2 percent to 4.2 percent. Your employer will still be paying their 6.2 percent. This is effectively replacing the Making Work Pay credit, a little known tax cut which essentially went unnoticed last tax season.
Reaping the benefits of this new tax cut does not require extra effort on your part, though, because you will see the change as part of your paycheck, and your employer will take care of the paperwork. The question, however, is when your employer will take care of the paperwork.
You may not see these changes right away because Congress did not exactly act swiftly in making sure employers new about this new bill. Employers were not alerted about the changes until the bill was officially enacted on December 17, 2010. Acknowledging their sometimes sloth-like pace, Congress decided to urge employers to adjust their withholding systems by January 31, 2010, so you should see a little higher paycheck come February. However, you may not see that money until April, since the IRS is merely urging employers to make changes as soon as possible, but not requiring the changes until March 31, 2011.
In other words, it will probably benefit you to inspect your 2011 paychecks to make sure your FICA contribution is lower. If you see nothing by April, it will be important to talk to your employer about the missing changes.