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Monday, January 09, 2012

PAYROLL TAX REDUCTION


For 2011 only, the Tax Relief Act also reduced the rate for the Social Security portion of payroll taxes to 10.4% by reducing the employee rate from 6.2% to 4.2% (the employer’s portion remained at 6.2%). The payroll tax reduction replaced the former making work pay credit, which expired at the end of 2010. However, while the making work pay credit was phased out for higher-income taxpayers, the payroll tax reduction applied to all workers who paid payroll taxes, regardless of income level, and should be reflected in box 4 on the taxpayer’s 2011 Form W-2, Wage and Tax Statement.

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