This week’s question comes from Seth, a company controller. It seems as if there are many changes in payroll recently. What are 10 hot items for payroll in 2011? Answer: The payroll industry and payroll departments have seen many changes as Congress uses the payroll and payroll tax system as a means to implement desired changes in social policy. Many items are new or revamped for 2011.
10 Hot Payroll Items in 2011
- 2011 Withholding Table Changes: Because of the recently passed Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act), employers should implement the 2011 withholding tables as soon as possible, but not later than January 31, 2011.
- Reduced Social Security Tax Rate for Employees: For 2011, the employee tax rate for Social Security is 4.2%, down from 6.2% in 2010. The employer rate remains at 6.2%.
- Expiration of Making Work Pay Credit: The Making Work Pay credit expired on December 31, 2010, resulting in higher federal withholding from many employees in 2011.
- Extension of COBRA Premium Assistance Credit: The credit for COBRA premium assistance payments has been extended to include premiums paid for employees involuntarily terminated between September 1, 2008, and May 31, 2010, and to premiums paid for up to 15 months.
- Advance Payment of Earned Income Credit (EIC) Discontinued: The option to receive advance payroll payments of EIC expired on December 31, 2010.
- Federal Tax Payments Must Be Made by Electronic Funds Transfer: With the discontinuation of Forms 8109 and 8109-B, most federal tax payments must now be made by electronic funds transfer.
- FUTA Tax Rate Scheduled to Decrease: Under current law, the FUTA tax rate will decrease from 6.2% to 6.0%, effective July 1, 2011.
- Withholding Allowance Amount Set at $3,700: For 2011, the amount for one withholding allowance on an annual basis is $3,700, up from $3,650 for 2009 and 2010.
- Aggregate Form 940 and Form 941 Filers Must File Schedule R: Agents must complete the appropriate Schedule R when filling an aggregate Form 940 or Form 941.
- Choose to File Form 941 Instead of Form 944: Employers notified that they should file Form 944, but who want to file Form 941 instead, may notify the IRS and request to file Form 941.
More Changes Expected Throughout 2011
Check VisionPayroll.com regularly as the only certain thing about payroll and payroll taxes for 2011 is that many more changes can be expected.