Federal Payroll “Tax Holiday” for 2011

A federal payroll “tax holiday” for 2011 was enacted into law on December 17, 2010. This tax break affects the employee’s portion of FICA, reducing it from 6.2% to 4.2%, while the employer’s share remains at 6.2%. Detailed information of the implications to employers can be found at the IRS website at http://www.irs.gov/newsroom/article/0,,id=232590,00.html?portlet=7. This shift in FICA calculations will require a significant change in the CDM+ Payroll program.

This new federal tax law is going into effect just as we are releasing the next major upgrade to CDM+, version 9.0. The necessary programming changes to accommodate the 2011 “tax holiday” are not being made in any previous release of CDM+. Therefore, anyone using the CDM+ Payroll program will need to upgrade to CDM+ 9.0 to be in compliance with IRS regulations.

The IRS understands that the short notice of this change in taxes for 2011 may mean that some employers will not be ready by January 1, 2011. According to the IRS website:

The IRS recognizes that the late enactment of these changes makes it difficult for many employers to quickly update their withholding systems. For that reason, the agency asks employers to adjust their payroll systems as soon as possible, but not later than Jan. 31, 2011.
For any Social Security tax over withheld during January, employers should make an offsetting adjustment in workers’ pay as soon as possible but not later than March 31, 2011.

We encourage you to upgrade to CDM+ 9.0 as soon as possible. Our support staff stands ready to assist you in this process. If you cannot upgrade to CDM+ 9.0 before your first payroll in 2011, instructions on how to make the necessary offsetting adjustments will be posted on our website by the end of January 2011.

Please note! Although upgrading to CDM+ 9.0 is necessary to produce correct 2011 payroll checks in CDM+, the upgrade process DOES NOT automatically update the Federal and State Tax Tables and FICA deduction rates for 2011. You must click the Web Update button on the Tax Tables window in the CDM+ 9.0 Payroll program after upgrading.

Thank you for allowing us to serve your payroll needs. We pledge to do our best to help you through this important new development. If you have any questions or concerns about how CDM+ accommodates the 2011 tax changes, please do not hesitate to contact us at 800-633-9581 or support@cdmplus.com.

Learn more about the CDM+ 9.0 upgrade.