New Tax Changes A Challenge For Businesses in 2011

Last-minute changes to the tax code enacted in 2010 may mean a paperwork headache for businesses in 2011. The bill that extended the Bush-era tax cuts also implemented a payroll tax cut. WNPR’s Harriet Jones reports.

The cut in payroll taxes is good news for employees, who will see a boost in their take-home pay come January. The cut reduces the social security tax-withholding rate by 2% from 6.2% to 4.2%. Employees themselves don’t need to take action to benefit from the cut, but businesses will have to handle the withholding changes, as well as work with a new set of income tax tables. IRS spokesman Gregg Semanick says employers must get up to speed quickly.

"The key thing is for employers and payroll companies, they’ll need to handle the withholding changes, and the IRS realizes that it may take time since the law was just enacted, so we’re encouraging them to make these changes by the end of January on behalf of the employees."

The IRS website at www.IRS.gov has posted resources for employers who need help to implement the new rates.

For WNPR, I'm Harriet Jones.