As we all know, the Social Security tax was reduced by 2% for 2011 from 6.2% to 4.2% of salaries up to $106,800. This tax is usually combined with the 1.45% Medicare tax into what is traditionally called FICA. For all employee withholding for the year, you should reduce your FICA amount by 2% from the usual 7.65% to 5.65%.
If you use Numbers Cruncher for calculating your breakeven and profitable selling price, be sure to make this adjustment on the Tax/Benefit form. You can reduce the FICA percentage to 5.65% for 2011. Numbers Cruncher will adjust all of your employees’ salary numbers, your breakeven and your profitable selling price automatically.
You can see a quick summary of the change on the IRS site. You should consult with your accountant to be sure you get this right.