Courtesy of my accountant, Carlos Castro at SmarTax and Accounting
As part of the Tax Relief Act of 2010, Social Security tax rates will be lowered by two percent. The employee-portion of Social Security taxes will be reduced from 6.2% to a temporary rate of 4.2% for 2011 only. This 2% tax break also applies to self-employed individuals. Medicare taxes are unchanged, the employer-portion of Social Security remains 6.2%, and the Social Security wage base remains $106,800 for 2011.
What it means: You could get a raise in your pay by as much as $2,136 in 2011. Unfortunately, for most clients this "raise" is offset somewhat by the expiration of the Making Work Pay Credit that expired in 2010. It also means you should be prepared for lower paychecks in 2012 as the Social Security tax rate goes back up.