Payroll Tax Happy Hour!
Kompai! Prosit! Na Zdrowie! Cheers! No matter how you say it, there is plenty to raise your glass about. The new tax law passed by Congress and signed by the President at the end of December provided for, amongst other nuggets, a payroll tax cut. Let me give you yet another excuse to raise your glass in toast by telling you how this will benefit us as taxpayers.
Currently, each employee pays 6.2% of their first $106,800 in salary into Social Security. Employers match that amount, and each party also pays 1.45% into Medicare. The one-year tax reduction from the payroll tax credit will reduce the employee’s contribution by two percentage points, meaning employees will pay only 4.2% of their first $106,800.
This tax cut will be figured into each paycheck you receive throughout the year; giving you a small boost in take-home pay that legislators hope you will spend to help stimulate the economy.
The payroll tax cut is designed to provide several benefits.
- Get more money into all worker’s paychecks and to encourage consumers to increase their spending (hopefully in your restaurant).
- Assist employees and self-employed workers in receiving a reduction of two percentage points in the Social Security payroll tax in 2011. The rate will be cut from 6.2% to 4.2% for employees and from 12.4 percent to 10.4 percent for the self-employed
- Additionally, for an employee earning the maximum $106,800 in earnings, their take-home pay will be $2,136 higher in 2011. For high roller couples, the payroll tax savings will be over $4,000.
There are a couple of online tools that will tell you how much additional money you’ll potentially bring home based on the new payroll tax cut. I thought Kiplinger’s was quick and easy. You might want to give it a try and then take your friends out for a happy hour with your tax savings. Well, maybe not.
For more information about the payroll tax cut and other tax savings strategies, contact Joe Odzer at 312.670.7444 or [email protected].