Employers that weren’t able to implement the 4.2% Social Security tax rate at the beginning of this year have only a couple days left to make adjustments.
IRS says you only have until March 31 to correct any taxes over-withheld in January, by making an offsetting adjustment in a subsequent pay period.
The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 called for a temporary 2% drop in the Social Security (OASDI) tax rate, from 6.2% down to 4.2%. Because of the short time employers were given to make this change, many ended up over-withholding in January. In a news release from earlier this year, IRS said that employers had to:
- implement the change “as soon as possible,” but no later than Jan. 1, 2011, and
- make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31 of this year.
Note that employees pay the 4.2% rate on wages up to the $106,800 taxable wage base, and employers continue paying the full 6.2%.
You can get more info here.