Pay-Impacting Tax Rate Changes 2011

To:  Avaya Local Presidents  

We have just received the information shown below from Avaya.  

In Unity,

Ralph V. Maly
Vice President

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US Payroll Communication

Congress and the IRS recently announced changes that have a positive impact on US employee's net pay for calendar year 2011.  Please review the following announcements for details:

Reduction in employee social security tax rate

The withholding of social security taxes from employees' wages for the employee share of social security tax is reduced from 6.2% to 4.2% for the first $106,800 of wages paid in 2011. The maximum that can be withheld will be $4,485.60, a $2,136 decrease from the 2010 maximum of $6,621.60.  The employee social security tax deduction is reflected on the pay stub detail under Taxes as Soc Sec/Disability.   

Employers will continue to pay the full 6.2% on employees' covered wages paid in 2011 for their share of social security taxes.

(Reducing Soc Sec tax increases your net pay without taking any action on your part)

Tax rates for Individuals

Under the Tax Relief Act of 2010 (TRA 2010), the current tax rates of 10%, 15%, 25%, 28% 33%, and 35% will stay in effect beyond their expiration date of December 31, 2010, for two years, through December 31, 2012.

Had TRA 2010 not been enacted, the 10% rate would have been eliminated and the other rates would have been set at 15%, 28%, 31%, 36%, and 39.6%, beginning January 1, 2011. TRA 2010 also extends marriage penalty relief that set the standard deduction for married individuals filing jointly at double that for single individuals and widened the 15% tax bracket to twice the size for joint filers that it is for single individuals.

Tax payers are encouraged to submit a new Federal Form W-4 each year and when their personal or financial situation changes to assure appropriate withholding.  You can change your Form W-4 information by going to the Quick Link section on The Source, selecting the Transactions link then clicking on Personal Data Changes.

(This impacts the rate at which you will be taxed.  Payroll is not in a position to recommend any W-4 changes as your personal tax situation dictates that decision.  Although the Act is maintaining the 2010 rates, you or your tax professional would need to review for possible changes.)