Tax Holiday? Did I read that right? Yes!
If you are an employee being paid w-2 wages, the tax package passed last week included Tile VI - TEMPORARY EMPLOYEE PAYROLL TAX CUT. (as of this writing, the IRS has not issued information on this (www.IRS.gov). Tax Holiday as defined in the legislation means 2011.
The payroll tax withholding will change from 6.2% to 4.2% on the FICA taxes being withheld. If you make $10/hour and work 40 hours, that will mean a net increase of about $8 per week. While that might not seem like much, in the course of a year, that is $416, enough to buy a flat screen TV.
On the surface it has a net effect of lowering your Social Security contributions, too. However it appears there is a provision transferring funds from the general fund to the Retirement funds. That is suppose to keep Social Security from falling behind.
No determination has been made as to how that will apply to self employment income.
For brokers and agents with paid w-2 assistants, please be sure to make the appropriate adjustments for your employees. There is no change in the amount of employer contributions.
If you want to look at the whole thing, please check out Thomas.gov. You can find all the info by referencing HR 4853.
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