Posts Tagged ‘payroll records’
New Social Security Tax Rate January 1, 2011
Congress just passed changes to the Federal Insurance Contributions Act (FICA) reducing the employee Social Security tax rate by two percentage points to 4.2%. Similarly, for self-employment income for tax years beginning in 2011, the Act reduces the Social Security tax rate under the Self Employment Contributions Act (SECA) tax by two percentage points to 10.4% percent. (Act Sec. 601)
If you are an employer, all your employees will receive a 2% increase in their paychecks on wages paid in 2011. This will cost you, the employer, nothing but there are some potential bookkeeping hassles.
As a result, for 2011, employees will pay only 4.2% Social Security tax on wages up to $106,800 and self-employment individuals will pay only 10.4% Social Security self-employment taxes on self-employment income up to $106,800. The maximum savings for 2011 will be $2,136 (2% of $106,800) per taxpayer. If both spouses earn at least as much as the wage base, the maximum savings will be $4,272.
If you use a software package like QuickBooks to do your payroll, you may have to manually override the employee portion of the Social Security if the software update is not available by the time you pay your first wages in 2011. If you are one of the many small business who manually calculate payroll, you will have a few extra steps to figure the amount of your payroll tax deposits.
What to do with Unclaimed Paychecks
Employers must make a reasonable effort to contact an employee to prevent wages from being abandoned and remain liable for unclaimed wages until paid or turned over to the state. Why the state? Unclaimed paychecks or paychecks returned by the post office as undeliverable are governed by state law. State laws vary from one to seven years.
In the state of Texas, unclaimed wages must be reported to the state annually and are “unclaimed property.” According to the State of Texas Comptroller’s website:
The Texas Comptroller of Public Accounts is responsible for administering the Texas Unclaimed Property Program. Property is turned over to the Comptroller’s office annually when the owner’s whereabouts are unknown and the property has been inactive on the books of the reporting company after the appropriate abandonment period has expired.
Worker Status – When is a Worker an Employee?
Unless the worker is an independent contractor, the answer is always!
There are specific criteria to determine if a worker is an employee or an independent contractor. The key word in that sentence is “independent.” The most important factor is who is in control. This is covered in more detail in our March 2010 article Employee or Independent Contractor?
But there are several other issues that can also trip you up.
IRS issues Forms, Instructions for HIRE Act Employer Tax Incentives
Social Security Tax Exemption
There are new tax benefits for employers in 2010 from the Hiring Incentives to Restore Employment (HIRE) Act. Qualifying employers have an exemption on their matching share of the 6.2% social security tax paid to qualifying employees effective on wages paid from March 19, 2010 through December 31, 2010. This exemption is claimed on form 941 beginning with the quarter ending June 30, 2010.
Record Retention Guide: What You Need to Keep
What records do you need to keep and for how long? This matrix shows you.
