The Social Security Administration announced recently that the Maximum Taxable Earnings or Social Security Wage Base would not change for 2011.
Social Security Increases Based on CPI Change
Since there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2010, the Social Security Wage Base will remain at $106,800. There is no provision for a Cost-of-Living Adjustment (COLA) when there is no increase in the CPI-W. Wages are taxed at 6.2%, so the maximum tax to be paid by each employee will be $6,621.60. About 7% of workers who pay Social Security Tax are expected to reach the maximum in 2010.
Retirement Earnings Test Exempt Amounts Remain Unchanged for 2011
For workers under full retirement age, $1 in benefits will be withheld for every $2 above the Retirement Earnings Test Exempt Amount of $14,160 per year or $1,180 per month. The year an individual reaches full retirement age, $1 in benefits will be withheld for every $3 above the Retirement Earnings Test Exempt Amount of $37,680 per year or $3,140 per month. The month an individual reaches full retirement age there is no limit on earnings. These amounts are also unchanged from 2010 to 2011.
Quarter of Coverage Amounts Stay at $1,120
Also unchanged for 2011 is that amount needed to earn a Social Security credit, formerly known as a quarter of coverage. In 2011, a credit will be earned for every $1,120 of earnings, up to a maximum of four credits.
Contact Vision Payroll if you have any questions on the Social Security changes for 2011 or get further information at Important Facts and Figures.