Source: CNN Money
NEW YORK (CNNMoney.com) — Come January, you’ll start to see some changes in your paycheck, as the new Social Security tax break that President Obama signed into law Friday takes effect.
The measure, part of a sweeping package of tax cuts, will reduce the amount of money workers pay into Social Security in 2011, which will mean more take-home pay for many workers, although not for all.
Workers normally pay 6.2% on their first $106,800 of wages into Social Security. As a result of the tax cut deal passed by the House on Thursday night, they will only pay in 4.2% in 2011.
So, for every thousand dollars in wages per paycheck up to the cap, one would only have $42 withheld (4.2% x $1,000), rather than $62 (6.2% x $1,000).
But given how late in the year it is, it may take employers a couple of pay periods to get everything working as it should.
Employers typically need a few weeks to program and test their new payroll systems. The IRS just issued guidance on Friday morning, a few weeks later than normal because Congress waited until the very last minute to render its decision on tax policy for 2011.
“It could be the third paycheck of the year before you see a ‘normal’ check,” said Scott Mezistrano, senior manager of government relations of the American Payroll Association.
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