Monday, President Obama and Republican congressional leaders agreed to a plan that will extend the “Bush Era” tax cuts for two more years.  In addition, they agreed that for 2011, the social security tax portion of the FICA tax will be reduced from 6.2 percent to 4.2 percent.  The reduction is on the employee side only, employers will still pay 6.2% of the first $106,800 in wages paid to an employee.  While this agreement has not yet been voted on, at least everyone can start wokring on changing the rate schedules for 2011.

A quick piece of advice to in-house payroll users (Those that use Quickbooks or trucking ERP software).  You’ll want to make sure that you get this change right by testing it and retesting it.  Some payroll software has FICA hard coded meaning that you’ll have to work to change it.  FICA hasn’t changed in almost 30 years so I can see why they programmed it that way but make sure that your software allows the employer and employee parts of FICA to be different.  Call me if I can help (616) 608-1800.

Mike

We’re only five weeks from 2011 and we still have no idea what the withholding rates will be.  It’s time for payroll people to be ready to quickly implement the new rates for 2011.  I will not be a shock if we don’t get these rates from the IRS until December 15.  As most of you know, congress is holding up the decision on whether or not to extend the “Bush” era tax cuts that expire at the end of 2010.  The debate seems to be on the high earners and if the cuts should be given to wealthiest Americans or should that money from the taxes be used to lower the deficit.  I think it’s a worthwhile debate but let’s get this done already.  Congress needs to vote up or down so we can start getting ready for 2011 before December 31!

I’ll keep updating this blog as there are developments (hopefully soon).

Today, I attended a presentation on Identity Theft from our local business association.  We were talking about ways that criminals will steal your information.  As I was driving back to the office, I thought that some company’s paycheck stubs are filled important information that would allow access to anyone if they were to steal the stub. 

With that in mind, be sure that your paycheck stub does not have your full social security number on it.  At the most, it should have something like xxx-xx-1234.  Also make sure that your bank accounts are not listed on the stub.  Even if the routing number isn’t on it, if they have the number they can sometimes figure out the bank by the numbering convention.

Hopefully your paycheck doesn’t have this information on it.  If it does contact your payroll provider immediately to have it removed.

I suggest that you give your employees some warning that they may have a bit less in their paycheck stating in 2011. http://www.bloomberg.com/news/2010-10-27/tax-debate-delay-has-employees-in-u-s-preparing-for-smaller-take-home-pay.html

Like all government things, they’ll sweat you out until the last minute so you’ll want to be sure your payroll people have the latest updates.

Mike

The SSA announced Friday that the Social Security wage base will remain at $106,800.00 for 2011.  The medicare wage base is still uncapped as it has been.

The IRS has announced that the requirement of reporting the cost of an employee’s health insurance on the W-2′s will not begin with 2011 as was previously determined.  They decided that payroll provders needed more time.  We didn’t need the time but thanks anyway, we’ll take it.

The IRS link is here http://www.irs.gov/pub/irs-drop/n-2010-69.pdf

The IRS has announced that the perdiem rate for trucking will remain at $59.00 for 2011.  While it would be nice if it went up, I think many truckers are probably happy that it didn’t go down.  This link http://www.irs.gov/pub/irs-drop/rp-10-39.pdf tells the whole story but it’s taxspeak so have a cup of coffee nearby.  The trucking part is in section .04.