Social Security tax lowered 2 percent

MOSES LAKE — Some U.S. workers are paying less taxes with a 2 percent decrease in the federal Social Security tax.

The cut is part of the federal Tax Relief Act passed by Congress in late December, which reduces the amount of Social Security withholding tax deducted from an employee’s paycheck, said accountant Rick Honsowetz, of Larson Allen LLP CPAs, Consultants & Advisors, in Moses Lake.

Last year, employees paid a combined total of 7.65 percent for Social Security and Medicare.

For this year only, the government reduces the Social Security tax to 4.2 percent until Dec. 31.

The Medicare tax remains the same.

It means for an employee earning $50,000 annually, $1,000 more is taken home.

“Theoretically, it’s putting more money in an employee’s pocket, to feed their families and pay their rents,” he commented. “It’s really important to remember this is for calendar year 2011 ... the point is, this is only a one-year rule.”

Honsowetz explained how employers match their employees’ Social Security and Medicare taxes, but that the employer match has not changed.

He clarified for employees earning $200,000 annually, they would only receive a 2 percent savings for earnings up to $106,800 annually.

Self-employed individuals paying both the employee and employer portions of Social Security and Medicare will see the 2 percent reduction as well.

The only concern he’s heard about the decrease is that the country has a Social Security system in financial trouble, but taxes funding it are being reduced.