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