2010 Year End Payroll News (Including the New Tax Act)


Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010

Significant provisions for payroll administration:

  • The employee Social Security tax rate for wages paid in 2011 has been reduced from 6.2% to 4.2%.  The Social Security wage base remains $106,800, and the employer Social Security tax rate remains 6.2%.  The maximum Social Security withholding for 2011 will be $4,485.60, compared to $6,621.60 for 2010.
  • The Making Work Pay Tax Credit, a credit of approximately $400 for single individuals and $800 for married couples filing jointly, which was built into the federal withholding tax tables, expired as of January 1, 2011. New tax tables will reflect the slight increase in withholding.
  • The Hiring Incentives to Restore Employment (HIRE) Act allowing employers to receive a ‘holiday’ social security tax on wages paid to a qualified new hire; this provision expired on December 31, 2010.
  • Elimination of Advanced Earned Income Tax Credit (AEITC) – The AEITC previously allowed taxpayers who expect to qualify for the Earned Income Tax Credit to receive part of the credit in each paycheck throughout the year by completing Form W-5. The Advance EITC has been repealed.  Therefore after December 31, 2010 qualifying employees will not receive the Advance EITC in their paychecks and there will no longer be a form W-5.

2011 Standard Mileage Rates

51 cents per mile for business miles driven

19 cents per mile driven for medical or moving purposes

14 cents per mile driven in service of charitable organizations

Elimination of Federal Tax Deposit Coupons

Beginning January 1, 2011, Federal Tax Deposits must be made electronically.  Due to a regulatory change, the Federal Tax Deposit coupons (Form 8109/8109-B) will no longer be accepted.  You may be charged a 10% penalty for each non-electronic deposit.

Visit www.eftps.gov or call EFTPS Customer Service at 1-888-434-7338 for enrollment or additional information.