Last week, I opened my first paycheck of the new year and was grateful to see that I had gotten a raise. Even better, it was a raise that didn’t cost my employer anything. Even better yet, all my friends and family who work got a raise too! Of course, I’m talking about the one-year payroll tax reduction included in the Tax Relief, Unemployment Insurance Authorization, and Job Creation Act of 2010.
The Social Security payroll tax on individual wages was lowered by 2% in 2011. For someone who makes $60,000, it means an extra $100 per month in take-home pay. Self-employed workers will also see the benefit since self-employment taxes will be cut from 12.4% to 10.4%. If you are self-employed, you should review your quarterly tax estimates carefully in April to take timely advantage of this tax break.
My thanks to the federal government for offering a positive note in the often bleak world of taxes. Lest we sink into collective depression over our tax burden, my hope with this blog is to share the good news and empathize with the bad news, offering practical tips along the way.