2011 PAYROLL TAX ALERT
Note the following changes in employer and employee payroll withholding tax rules effective January 1, 2011.
Federal
The employee withholding tax rate is reduced to 4.2% for Social Security and remains at 1.45% for Medicare (combined 5.65%). The wage base for Social Security is unchanged from $106,800 while the wage base for Medicare continues to be unlimited. The maximum amount of Social Security tax to be withheld from each employee, for the 4.2% portion, will remain at $4,485.60. The employer portion remains at 6.2% for Social Security and 1.45% for Medicare.
Federal Unemployment Insurance
The first $7,000 earned by each employee is subject to Federal Unemployment Insurance. Based on current law, the tax rate for 2011 will be 6.2% with credit given for State Unemployment Insurance timely paid in California of not more than 5.4% giving an effective rate of 0.8%. Federal Unemployment Insurance is employer paid and must not be deducted from the employee’s wages.
State – California
The 2011 Employment Training Tax (ETT) rate for most businesses is 0.1%. This may vary somewhat and some companies may have a rate of 0.0%. The Unemployment Insurance (UI) and ETT taxable wage limit remains at $7,000 per employee per calendar year.
State Disability Insurance (SDI) – California
The State Disability Insurance (SDI) withholding rate for 2011 is 1.2%. The taxable wage limit is $93,316 for each employee per calendar year. The maximum to withhold for each employee is $1,119.79.