Social Security Payroll Taxes Reduced in 2011

[creditcardfree]

For one year, the federal government is reducing the amount of social security tax it collects from your paycheck from 6.2% to 4.2%. That means an increase in your paycheck.

I say make it count. What are you going to do with your increase?

Tax Bill is Law

[maat55]

I'm sure DW will blow hers. I will beef up the EF.

[TBH]

Does anybody know if they've reduced self-employement taxes too? Self employment taxes are super high because you have to cover your share of social security AND the amount that your employer would be paying if you had one.

Doesn't seem fair to reduce employees' social security taxes for one year and not reduce the self employment tax also.

I think the right answer to the OP's question is to contribute extra to our personal retirement accounts this year since we (at least employees) are paying smaller social security taxes. I'm struggling to not *reduce* my retirement contributions. Still need to get a better handle on the household budget after moving into a bigger house and going through some big medical expenses last year.

[maat55]

Does anybody know if they've reduced self-employement taxes too? Self employment taxes are super high because you have to cover your share of social security AND the amount that your employer would be paying if you had one.

Doesn't seem fair to reduce employees' social security taxes for one year and not reduce the self employment tax also.

I think the right answer to the OP's question is to contribute extra to our personal retirement accounts this year since we (at least employees) are paying smaller social security taxes. I'm struggling to not *reduce* my retirement contributions. Still need to get a better handle on the household budget after moving into a bigger house and going through some big medical expenses last year.

I as a self-employed person expect to see a reduction in the amount I am required to deposit quarterly on my accumulated income.

[kork13]

SS payments for self-employed should go down for part of them. The law specifically states that it is the employee's half of the contribution that will be reduced, while the employer's half of the contribution will remain the same. So although obviously I don't know for certain, my guesstimate would be that instead of paying 12.4% (the standard employer and employee contributions), you'll only have to pay 10.4% (the standard employer and reduced employee contributions). Don't take it as gospel, but that's my guess.

As for doing something with it...I'll only be getting about $75/mo extra. My pay varies more than that every month as it is, so it likely won't be a significantly noticeable change for me. As I'm already saving alot every month, I may start trying to force myself to do a little 'fun money' spending, as I currently do very little of that. Downside: I'm currently living in Japan, so the only economy to which I would be making my "patriotic boost" (unless I do my shopping online) is the Japanese economy.

[Aleta]

You can go to irs.gov and type in notice 1036 and it gives you the information. The employer even self-employed will still pay the 6.4

[MonkeyMama]

SS payments for self-employed should go down for part of them. The law specifically states that it is the employee's half of the contribution that will be reduced, while the employer's half of the contribution will remain the same. So although obviously I don't know for certain, my guesstimate would be that instead of paying 12.4% (the standard employer and employee contributions), you'll only have to pay 10.4% (the standard employer and reduced employee contributions). Don't take it as gospel, but that's my guess.

Yes, it is the same for self-employed as it is for employees.

[Snodog]

This SS tax-cut just replaces the "Make Work Pay" tax credit of the past couple of years, so it's not really a big deal.

Most will come out ahead but some lower-income people will actually pay more next year.

[TBH]

Thanks everybody for the info re: self employment taxes. I'm already trying to gear up for the 2010 tax season. I have more deductions than usual this year and I'm hoping I don't trigger an audit.

[creditcardfree]

This SS tax-cut just replaces the "Make Work Pay" tax credit of the past couple of years, so it's not really a big deal.

Most will come out ahead but some lower-income people will actually pay more next year.

True. Here is an article explaining just that.

[krantcents]

For one year, the federal government is reducing the amount of social security tax it collects from your paycheck from 6.2% to 4.2%. That means an increase in your paycheck.

I say make it count. What are you going to do with your increase?

Tax Bill is Law

Unfortunately, it is not enough to change much! It will make it easier to add to my my 403B, IRA and Roth IRA. Most people will spend it, so it will help the economy. Isn't that the intent?

[Bcp1984]

I will increase my TSP by this amount, seeing as how this bill pretty much ensures that I will see zilch come time for me to collect social security, even though i am financing everyones social security right now.

By the way, even though FDR had the people at heart when he passed the Social Security Act in the New Deal in the early thirties, I personally do not believe in it. Essentially we loan the government our money to get it back when we are 65, if we even live to that age. I say give me my 6.5 percent of my pay and let me invest it on my own. At least it's still my money.

This was a horrible move IMO, as well as letting the wealthy skate yet again.

[littleroc02us]

It's about time the republicans, some democrats and the president compromise to get something done. I'm actually proud of Obama for the second time ever that he worked bipartisan to get something done.

[KTP]

[QUOTE=Bcp1984;278638] I say give me my 6.5 percent of my pay and let me invest it on my own. At least it's still my money.

[QUOTE]

What if you were given 12.4% of your pay instead?

[disneysteve]

What if you were given 12.4% of your pay instead?

Can you imagine? We currently save 25% of our gross pay. If we could save 37.4% instead without changing any of our current spending, we'd be so much better off when retirement rolled around. That would be fantastic.