Payroll office announces new tax and Social Security withholding rates

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(Jan. 6, 2011)--The Tax Relief Act 2010 was passed by Congress and signed into law Dec. 17 and went into effect Jan. 1. Income tax withholding tables were updated and went into effect Jan. 3 for the first UTSA payroll date of the new year. The Bush Era federal tax rates set to expire Dec. 31, 2010, were extended by the Tax Relief Act 2010 to Dec. 31, 2012. The Bush Era tax rates were set by bills enacted into law in 2001 and 2003.

The American Recovery Reinvestment Act (ARRA) Making Work Pay Tax Credit was allowed to expire Dec. 31, 2010. Enacted in February 2009, the tax credit allowed an income tax credit of $400 for single individuals and $800 for married couples filing jointly. The Making Work Pay Tax Credit was paid through reduced income tax withholding.

The Tax Relief Act 2010 makes a major change in withholding Social Security taxes from employees. For wages paid in 2011, Social Security tax will be reduced from 6.2 percent to 4.2 percent for the first $106,800. The maximum that can be withheld will be $4,485.60, a decrease of $2,136 from the 2010 maximum of $6,621.60. UTSA departments (employers) will continue to pay the full 6.2 percent portion of the employee's covered wages paid in 2011. The effective period of reduced Social Security tax for employees is Jan. 1-Dec. 31, 2011, as determined by payroll check date.

Other provisions of the Tax Relief Act 2010

  • Child tax credit -- The increase from $500 to $1,000 in the maximum child tax credit for individuals with income below certain thresholds is extended for two years through Dec. 31, 2012. Employees can claim additional allowances on Form W-4 based on their eligibility for the credit.
  • Dependent care credit -- The increase in the maximum child care expenses that qualify for the dependent care tax credit from $2,400 for one child and $4,800 for two or more to $3,000 and $6,000 respectively is extended for two years through Dec. 31, 2012. Employees can claim additional allowances on Form W-4 based on their eligibility for the credit.
  • Employer-provided educational assistance (EAP) -- The income exclusion for up to $5,250 of employer-provided undergraduate and graduate educational assistance under IRC 127 is extended for two years through Dec. 31, 2012.

Employees can change income tax withholding election

According to the new income tax withholding tables, employees can change their withholding tax amount for paychecks for the remainder of 2011. Employees have two options for changing income tax withholding:

  • Option 1: Employees can change their payroll withholding W-4 election electronically at the UT Direct website.
  • Option 2: Employees can submit a revised W-4 form to the UTSA Payroll Office. To download a form, visit the UTSA Payroll website and select "W-4 Form."