Disclaimer of Liability
The information in this e-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice,
accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used
as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or
taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular
situation.
The author of the tax articles in this e-newsletter did not intend nor write the advice to be used to avoid any penalty imposed by a
taxing authority, nor may any user/recipient of this document use this document's written tax advice for that purpose. This document's
tax advice was written specifically to support the promotion or marketing of the transaction/matter addressed by the written tax advice.
Therefore, any user/recipient of this document should seek an independent tax professional's advice regarding the user/recipient's
particular circumstances.
The information is provided "as is" with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and
without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for
a particular purpose.
The information in this e-newsletter is for general guidance only, and does not constitute the provision of legal advice, tax advice,
accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used
as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or
taking any action, you should consult a professional advisor who has been provided with all pertinent facts relevant to your particular
situation.
The author of the tax articles in this e-newsletter did not intend nor write the advice to be used to avoid any penalty imposed by a
taxing authority, nor may any user/recipient of this document use this document's written tax advice for that purpose. This document's
tax advice was written specifically to support the promotion or marketing of the transaction/matter addressed by the written tax advice.
Therefore, any user/recipient of this document should seek an independent tax professional's advice regarding the user/recipient's
particular circumstances.
The information is provided "as is" with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and
without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for
a particular purpose.
| Serving the Central Pennsylvania area since 1981 |
| Robert A. Romako, CPA |
| Important Payroll Tax Changes For 2011 |
It appears Congress and the President have finally reached a compromise on personal income tax rates for 2011, although
important details must still be worked out. Even the Social Security tax rate is under discussion. Fortunately, other employer
withholding taxes are known. Here is a quick recap of employer payroll tax rates, wage bases, and other important payroll tax rules for
2011:
Mandatory electronic tax deposits. The Department of the Treasury has announced that employers who deposit more than
$2,500 per quarter in combined Federal withholding and FICA payments for their employees will need to make those deposits through
EFT transfers starting in 2011. This means that employers will no longer take a paper coupon and check to their local bank to make
the payroll tax deposit. Employers with small payrolls (under $2,500 in required deposits for the quarter) may continue to pay the tax
when they file the Form 941 tax return.
Because registration and set up for participation in the EFT system may take some time, employers who have not yet used the system
may want to sign up early and take some time to become familiar with the system, before actual tax deposits are due.
New Pennsylvania Unemployment Compensation reporting. Beginning in November, 2010, employers who used the
Pennsylvania e-TIDES system for reporting and paying their unemployment taxes must make a switch to the new Unemployment
Compensation Management System (UCMS). Other business taxes, such as Pennsylvania withholding and sales tax, will continue to
be reported using the e-TIDES system. All employers must begin to report and remit unemployment taxes electronically using the
UCMS system effective for the first quarter, 2011 filing period.
The new system is designed to automatically calculate the employer tax due based on wage reporting entered into the system. The
system can also handle amended reports for previous quarters. Taxes will be remitted online using ACH debit or credit transfers.
More details and registration screens can be found on the Department of Labor and Industry’s website, www.dli.state.pa.us.
Federal withholding. Because personal income tax brackets are not yet established, new Federal withholding tables have not been
issued. Congress and the President are expected to keep the 2010 tax rates in place for another 2 years, but the Making Work Pay
credit may not be extended. Watch for announcements when new tables have been issued.
Social Security withholding. The maximum amount of earnings subject to Social Security tax will remain at $106,800 for 2011, the
same amount that was in place for 2010. The Social Security withholding rate stays at 6.2% (doubled to 12.4% for self-employed
individuals). The Medicare tax of 1.45% (2.9% for self-employed) is unchanged as well, and is imposed on all earnings without limit.
However, at the time of writing this newsletter, there is discussion about reducing the Social Security tax rate to 4.2% for 2011, so
watch for new developments in the next few weeks.
Pennsylvania withholding. The Pennsylvania withholding rate remains at 3.07% for 2011. Governor-elect Corbett had campaigned
on no tax increases, so the rate is not expected to change during the year. However, Pennsylvania is facing a $4 to $5 billion deficit in
2011, so the possibility of a tax increase is not beyond belief.
Local withholding. Many local municipalities have made changes in their local earned income tax collection bureau for the 2011
year. Make sure you or your payroll service is remitting the local taxes to the proper collection office, and that you are withholding at
the proper tax rate. The tax collection office and the local withholding rate can be found at http://munstatspa.dced.state.pa.us/registers.
aspx.
Local service tax withholding. For employers located within municipalities that impose the $52 per employee Local Service Tax
(LST), the withholding requirements are unchanged for 2011. The $52 annual tax is imposed on all employees expected to earn at
least $12,000 during the year within the taxing municipality. The tax must be withheld from each regular paycheck and cannot be
collected in a one-time lump sum withholding. The tax is remitted to the local tax collection bureau at the same time local withholding
taxes are remitted.
Federal unemployment. The Federal unemployment withholding tax remains unchanged at 0.8%, with a maximum wage base of
$7,000.
Pennsylvania unemployment. The employer Pennsylvania unemployment tax base remains unchanged at $8,000. Be sure to use
the correct employer tax rate; you should have received a letter from the Dept. of Labor and Industry to communicate your company’s
new tax rate for 2011. The employee withholding rate is .08% for 2011, which is unchanged from 2010.
401(k) contribution limits. The maximum employee deferral contribution to a 401(k) plan remains at $16,500 for 2011. Employees
age 50 and over in 2011 can defer an additional $5,500 for 2011. These limits are the same as those used in 2010.
* * * * *
Do you need blank tax forms for 2010? With the increase in electronic filing, both by individuals and employers, the IRS has
announced they will no longer automatically send out blank tax forms. This now includes Forms W-2, W-3, and the 1099 series. You
may still use paper forms for filing, but you must request these from the IRS. Although facsimile forms are available on the IRS website,
they are not printed with the special scannable ink fields (pink paper) and should not be used. Needed forms can be ordered at no
cost on line from the IRS web site, www.irs.gov. The 2010 W-2, W-3, 1099 and 1096 forms are available now; there is no need to wait
until 2011 to place your order. Although I stock a few forms for “emergencies”, please do not rely on my office for these forms. Form W-
2’s and 1099’s must be provided to recipients by January 31, 2011, so do not delay in ordering the forms you might need.
important details must still be worked out. Even the Social Security tax rate is under discussion. Fortunately, other employer
withholding taxes are known. Here is a quick recap of employer payroll tax rates, wage bases, and other important payroll tax rules for
2011:
Mandatory electronic tax deposits. The Department of the Treasury has announced that employers who deposit more than
$2,500 per quarter in combined Federal withholding and FICA payments for their employees will need to make those deposits through
EFT transfers starting in 2011. This means that employers will no longer take a paper coupon and check to their local bank to make
the payroll tax deposit. Employers with small payrolls (under $2,500 in required deposits for the quarter) may continue to pay the tax
when they file the Form 941 tax return.
Because registration and set up for participation in the EFT system may take some time, employers who have not yet used the system
may want to sign up early and take some time to become familiar with the system, before actual tax deposits are due.
New Pennsylvania Unemployment Compensation reporting. Beginning in November, 2010, employers who used the
Pennsylvania e-TIDES system for reporting and paying their unemployment taxes must make a switch to the new Unemployment
Compensation Management System (UCMS). Other business taxes, such as Pennsylvania withholding and sales tax, will continue to
be reported using the e-TIDES system. All employers must begin to report and remit unemployment taxes electronically using the
UCMS system effective for the first quarter, 2011 filing period.
The new system is designed to automatically calculate the employer tax due based on wage reporting entered into the system. The
system can also handle amended reports for previous quarters. Taxes will be remitted online using ACH debit or credit transfers.
More details and registration screens can be found on the Department of Labor and Industry’s website, www.dli.state.pa.us.
Federal withholding. Because personal income tax brackets are not yet established, new Federal withholding tables have not been
issued. Congress and the President are expected to keep the 2010 tax rates in place for another 2 years, but the Making Work Pay
credit may not be extended. Watch for announcements when new tables have been issued.
Social Security withholding. The maximum amount of earnings subject to Social Security tax will remain at $106,800 for 2011, the
same amount that was in place for 2010. The Social Security withholding rate stays at 6.2% (doubled to 12.4% for self-employed
individuals). The Medicare tax of 1.45% (2.9% for self-employed) is unchanged as well, and is imposed on all earnings without limit.
However, at the time of writing this newsletter, there is discussion about reducing the Social Security tax rate to 4.2% for 2011, so
watch for new developments in the next few weeks.
Pennsylvania withholding. The Pennsylvania withholding rate remains at 3.07% for 2011. Governor-elect Corbett had campaigned
on no tax increases, so the rate is not expected to change during the year. However, Pennsylvania is facing a $4 to $5 billion deficit in
2011, so the possibility of a tax increase is not beyond belief.
Local withholding. Many local municipalities have made changes in their local earned income tax collection bureau for the 2011
year. Make sure you or your payroll service is remitting the local taxes to the proper collection office, and that you are withholding at
the proper tax rate. The tax collection office and the local withholding rate can be found at http://munstatspa.dced.state.pa.us/registers.
aspx.
Local service tax withholding. For employers located within municipalities that impose the $52 per employee Local Service Tax
(LST), the withholding requirements are unchanged for 2011. The $52 annual tax is imposed on all employees expected to earn at
least $12,000 during the year within the taxing municipality. The tax must be withheld from each regular paycheck and cannot be
collected in a one-time lump sum withholding. The tax is remitted to the local tax collection bureau at the same time local withholding
taxes are remitted.
Federal unemployment. The Federal unemployment withholding tax remains unchanged at 0.8%, with a maximum wage base of
$7,000.
Pennsylvania unemployment. The employer Pennsylvania unemployment tax base remains unchanged at $8,000. Be sure to use
the correct employer tax rate; you should have received a letter from the Dept. of Labor and Industry to communicate your company’s
new tax rate for 2011. The employee withholding rate is .08% for 2011, which is unchanged from 2010.
401(k) contribution limits. The maximum employee deferral contribution to a 401(k) plan remains at $16,500 for 2011. Employees
age 50 and over in 2011 can defer an additional $5,500 for 2011. These limits are the same as those used in 2010.
* * * * *
Do you need blank tax forms for 2010? With the increase in electronic filing, both by individuals and employers, the IRS has
announced they will no longer automatically send out blank tax forms. This now includes Forms W-2, W-3, and the 1099 series. You
may still use paper forms for filing, but you must request these from the IRS. Although facsimile forms are available on the IRS website,
they are not printed with the special scannable ink fields (pink paper) and should not be used. Needed forms can be ordered at no
cost on line from the IRS web site, www.irs.gov. The 2010 W-2, W-3, 1099 and 1096 forms are available now; there is no need to wait
until 2011 to place your order. Although I stock a few forms for “emergencies”, please do not rely on my office for these forms. Form W-
2’s and 1099’s must be provided to recipients by January 31, 2011, so do not delay in ordering the forms you might need.
DECEMBER 2010 NEWSLETTER ARTICLE
| Robert A. Romako, CPA 220 Haldeman Avenue New Cumberland, PA 717.774.3047 |