Archive for December, 2010

New Social Security Rates and Income Tax Withholding for 2011

Starting January 1, 2011, the rates for Social Security and Income Tax withholding will change.  If you do not make the change on January 1st, you have until January 31, 2011 to make the change.  My advice, try to get the changes in place for any wages paid in 2011.  It will make your reporting process easier.  You have to make the changes sooner or later, so do it sooner, like in now.

Social Security Rate Changes:

               For the employee, the new withholding rate has been decreased by 2%, reducing it from 6.2% to 4.2%.  However, make sure you understand that the employer rate did not change.  It remains at 6.2%.  If you have a payroll service, they will (or should) take care of this for you, but if you calculate your payroll manually, make sure you use the new rates for the employee at  4.2% and the employer rate at 6.2%.  The taxable wage base limit if $106,800 for 2011.

 Income Tax Withholding Rate Changes:

                The Making Work Pay credit expires on December 31, 2010, and as a result, the income tax withholding tables are being revised.  This information is in an IRS Notice 1036 and will also be reprinted in Publication 15 (Circular E) which will be posted on IRS.gov very soon.  This change is also effective January 1, 2011.

Medicare Tax Rates:

                There is no change in the Medicare Tax Rate.  It remains at 1.45% for both the employee and employer

 You can obtain a copy of Notice 1036 by googling IRS notice 1036.  Next week, try going to IRS.gov and see if the new Publication 15 (Circular E) is available on-line.

Call me (402) 502-2255 or email me (dale@cfoomaha.com)  if you have a question.

It’s Time to Start Planning Your Year-End Tax Position

You only have 3 weeks to the end of the year so now is the time to talk to your tax specialist or CPA to plan for your year-end tax position.  Whether you need to purchase some equipment or inventory or trade investments, now is the time to make that decision so it is all completed by December 31st.  The decisions you make can affect your tax burden by thousands of dollars and even have an effect on your 2011 operation, so this is an important event.

 The main thing you need to do in order to be prepared is get your Quick Books or whatever accounting system you use, up to date.  That means all of your invoices prepared, all payments recorded and your accounts payable up to date because your tax specialist can not determine your strategy without your records being complete.

We still don’t know what the government is going to do about taxes for next year, so make sure you take care of this year properly and then you can deal with next year’s taxes when they come.  In our present economic situation, you, as a business owner or manager, must add managing your tax situation to all of the other responsibilities you have.  You are not being a good manager of the resources you have if you over-pay your taxes.

Call me (402) 502-2255 or email me (dale@cfoomaha.com)  if you have a question.