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2011 Federal Withholding Tables Released
The amount of one withholding allowance for 2011 increases to $3,700, as the Internal Revenue Service has posted Notice 1036, Early Release Copies of the 2011 Percentage Method Tables for Income Tax Withholding. IRS is urging employers to implement the 2011 withholding tables as soon as possible, but not later than Jan. 31, 2011.
In a news release (IR-2010-124) accompanying the federal income tax withholding tables, IRS acknowledged that it would take time to implement the reduction in the Social Security tax withholding rate for employees from 6.2 percent to 4.2 percent of wages paid that is part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act Of 2010 (which is awaiting the President's signature).
IRS "recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011. For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers' pay as soon as possible but not later than March 31, 2011."
The 2011 percentage method withholding tables are included in Notice 1036, which also mentions the difference for 2011 in the employer tax rate (6.2 percent) for the Old-Age, Survivor, and Disability Insurance portion of the Federal Insurance Contributions Act. The new tables reflect the Dec. 31, 2010, termination of the Making Work Pay credit, as well as the advance payment of the earned income credit. Special instructions also are included in the notice for withholding on wages earned by nonresident aliens.