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    Payroll Tax Law Changes for 2011 and 2012

    Article ID: 2000996

    Overview

    Last updated: February 23, 2012


    New! See updated information to the Social Security Tax in the 2012 Tax Year section.

    There are several federal payroll-related items that may affect you as an employer for tax years 2011 and 2012.

    2011 Tax Year

    Federal Unemployment Tax Act (FUTA)

    There are changes to 2011 FUTA Credit Reduction, Form 940 and Schedule A (Form 940)

    • The expiration of the Federal Unemployment Tax Act (FUTA) surtax in June 2011.
    • Changes on the Forms 940 and Schedule A (Form 940) for 2011.
    • There are 21 states subject to FUTA credit reduction.

    For more information on the FUTA changes, click here.

    Form W-2 and Form W-3

    For the 2011 tax year, the IRS has implemented several changes in Form W-2, Wage and Tax Statement, and Form W-3, Transmittal of Wage and Tax Statements. For more information and instructions, you can download the instructions from the IRS website.

    Employee Social Security Tax Withholding

    The 2011 Social Security tax rate for employees was reduced from 6.2% to 4.2% by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010.

    Advance Earned Income Credit (EIC) Payments

    For tax years beginning after December 31, 2010, the advance earned income credit payment has been eliminated. As a result, the 2011 Form W-2 and Form W-3 no longer include box 9, Advance EIC payments.

    Hiring Incentives to Restore Employment (HIRE) Act

    The reporting of HIRE wages and tips paid to qualified employees was effective for wages paid in tax year 2010. Since the reporting does not apply for tax year 2011, code CC has been removed from the box 12 entries. Also, box 12b on Form W-3 has been eliminated.

    Designated Roth Contributions

    The IRS has added code EE, Designated Roth contribution under a government 457(b) plan, to the list of codes in box 12 of Form W-2. This code supports the new option for plan participants to treat elective deferrals as Roth contributions.

    Form W-3, Kind of Employer

    Box b of Form W-3 has been expanded to include a new section, Kind of Employer, which includes five new checkboxes. Filers must check one of the new checkboxes.

    Reporting Employer-Provided Health Coverage

    Intuit QuickBooks Payroll: The Affordable Care Act required employers to report the cost of employer-provided health care coverage on Form W-2 in box 12, code DD. The reporting requirement is not mandatory for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012). For more information, click here.

    Intuit Online Payroll: The W-2 e-File solution is compliant with all Forms W-2/W-3 updates. Since reporting requirement is not mandatory for all employers for the 2011 Forms W-2 (generally furnished to employees in January 2012), the Service does not support the reporting of the cost of employer-provided health care coverage on Form W-2 in box 12, code DD. Note: The Form W-3 is filed electronically but is not available to view or print.

    2012 Tax Year

    Federal Withholding Tables

    Federal withholding tables (includes the withholding adjustment for Nonresident Aliens) is effective January 1, 2012.

    Social Security Taxes

    The taxable wage base for Social Security Old Age Survivor's and Disability Insurance OASDI increased to $110,100 from $106,800.

    New! On February 22, 2012, President Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630). The Act extends the reduced employee Social Security tax rate, maintaining the employee portion of the social security tax rate at 4.2% through December 31, 2012.

    Click here for more information about how Intuit QuickBooks Payroll and Intuit Assisted Payroll are supporting the Payroll Tax Cut Extension.

    Reporting Employer-Provided Health Coverage

    The IRS issued interim guidance (Notice 2011-28) to employers on informational reporting to employees of the cost of their group health insurance coverage reported on Form W-2, box 12 code DD. For more information on how the interim guidance affects the reporting of employees 2012 Forms W-2 (to be filed in 2013), click here.

    Other Newsworthy Reminders

    Form W-4, Employee's Withholding Allowance Certificate

    Workers should review their withholding every year and if necessary, fill out a new Form W-4 and submit it to their employer. Workers who claimed exempt on their 2011 Form W-4 will need to complete a new Form W-4 for tax year 2012 by February 16, 2012 in order to maintain their exempt status.
    Intuit Payroll is committed to keeping you up-to-date with your payroll service - making sure you have the latest information. We encourage you to revisit this article periodically for any updates and additional FAQs.

    Assumptions

    You have an active payroll subscription.

    Details

    Frequently Asked Questions

    What do I need to do?

    • QuickBooks Payroll and Assisted Payroll: Download Payroll Update 21206 on or after February 23, 2012. This payroll update include modifications to the Social Security withholding tax rate to 4.2% (employee portion) through December 31, 2012.

    • All Intuit Online Payroll Services: The federal changes are updated automatically. No action is required on your part.

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