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Taxes Take a Holiday

January 4th, 2011 Leave a comment Go to comments

Tax HolidayHoliday! Celebrate!

Hey, maybe I could use Madonna lyrics for my blog post titles.  What do you think?  Material Girl, Gambler, Like a Prayer, Rescue Me, Causing a Commotion, Give It 2 Me, Don’t Cry For Me Argentina?  Hmm, maybe not.

But the holidays aren’t ending for us here in the US, because we now get to enjoy a Payroll Tax Holiday all year through.  That is what this temporary reduction in Social Security contributions is being called, at least. And I don’t know how much celebrating will be going on. Essentially, for the next year, you will pay 2% less of your gross towards Social Security, making it 4.2%, but your employer will still “match” the 6.2% that you normally pay.  Anything above $106,800 doesn’t pay on this anyways, so no gift to you people. The average American is going to see an extra $35-$50 on their paycheck, assuming you get paid bi-weekly.

This isn’t that big of a deal, because the Making Work Pay Tax Credit is going away. I don’t mind because it bit me in the butt by not having enough withheld again this year.

Hurry Up and Wait

Because Congress didn’t pass this legislation until the 11th hour, the IRS is giving companies some extra time to get it together, according to Don’t Mess With Taxes.

Companies will be able to delay adjusting the withholding down to 4.2% until January 31st, but they must make that amount up to you before March 31st.  Meaning your first paycheck might not change.

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