One of the most important provisions of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the “Act”), which was signed into law on December 17, 2010, deals with Social Security tax reduction for employees.
The Act reduces the employee’s share of Social Security tax from 6.2% to 4.2% for wages earned in 2011 up to $106,800. The employer’s share of Social Security tax remains at 6.2%. The Act makes no changes to the Medicare portion of payroll taxes, which remains at 1.45% for each of the employee and employer on all wage income.
Individuals who are self-employed will also benefit from the Act’s Social Security tax reduction. Self-employed individuals would pay Social Security tax at a 10.4% rate on self-employment income up to $106,800. However, self-employed individuals would continue to calculate their deduction for employment taxes without regard to the temporary rate reduction.
If you have tax questions or need tax representation, contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax lawyer.