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The 2011 Stimulus Check: 2% Payroll Tax Holiday

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Money Money MoneyWhen Congress passed an extension on the Bush tax cuts, it also passed a new one year tax “holiday” on your payroll taxes. I’m calling it the 2011 version of an old friend to many Americans, the stimulus check. Back in 2008, after the passage of the 2008 stimulus package, many Americans received $300 in the form of a stimulus check. In years since, that stimulus check has been morphed into the Making Work Pay credit (resulting in $400 per person).

For 2011, the stimulus check has returned and this time it’ll be called a payroll tax holiday with a benefit of up to $2,136 per person.

Payroll Tax Holiday

Right now, employees pay a payroll tax, also called FICA tax, of 7.65% on their first $106,800 of income. 6.2% goes towards Social Security (OASDI) and 1.45% goes towards Medicare. After their first $106,800, you only pay the 1.45% of Medicare (there is no limit) and not the 6.2% towards Social Security. For 2011, the percentage you need to pay towards Social Security, as an employee, will be reduced by 2%. For someone earning the maximum $106,800, it’s a reduction of $2,136. After you take out taxes, based on your tax bracket, the rest goes into your pocket.

The first stimulus check gave you $300, the next one gave you up to $400, and this one has the potential of putting over two thousand dollars into your pocket over the course of the year (minus taxes).

(Photo: Tracy O)

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90 Responses to “The 2011 Stimulus Check: 2% Payroll Tax Holiday”

  1. Brad says:

    Correction: The “up to $2,136″ is not taxed. Every dollar goes in your pocket.

  2. Glaisne says:

    Say goodbye to Social Security, for this is the beginning of the end of it. This one year “holiday” will become permanent, with further cuts in the future followed by privatization and the end.

    • Anonymous says:

      i sure hope so!

      • NateUVM says:

        Privatization of SS will incur greater administrative costs. Can’t see how that’s a good thing…except for the fat cats running the private accounts…

        • Scott says:

          I already privatized my SS; it’s called a 401k and investment account. I don’t rely on anyone outside of my immediate family.

          “If” I get SS, that’s just icing on the cake. I suspect they will change something by the time I get there.

          • NateUVM says:

            Agreed 100%. I don’t even consider SS when thinking about retirement.

            My thought was more just about the costs to our country if we were to privatize SS. I don’t care how cheap each individual account manager makes their costs, it’s going to be more expensive than what the SSA is doing today.

            Bottom line: In aggregate, what costs more to run… One large account, or ~310 million little ones…?

          • SoonerNATX says:

            @ NateUVM

            answer: one large account… when its the goverment running it.

          • Corey says:

            I with ya on that one. Im not counting on any extras when I retire or if make it to that age, but if I do it will just be a bonus to me also if I get it!!

    • john crawford says:

      If they would have allowed Bush to privatize a SMALL part of contributions that were YOURS to control, and not part of the big pot that the politicians stole from in the past.. that certainly would have helped some… but, of course the lies and distortions prevailed, and NOTHING was done…. as usual…

    • Sam says:

      It’s not permanent. It goes away at the end of the year.

    • marju says:

      Compare your 2011 SS statement with your 2010 one. Your benefits have DECREASED. Tax holiday = lower benefits. No such thing as a free lunch. What a con job.

  3. Ryan says:

    So in lay terms, we will get 2% of our gross pay back in for form of a check? Or is this through out the year less taxes will be taken out?

  4. DIY Investor says:

    Every paycheck will be a little bigger. Payroll tax will be reduced 2%.
    Glaisne is exactly right – this blows a huge hole in Social Security.
    We’ve gone from avoiding our problems to explicitly seeking ways to make them worse.
    Sad.

  5. Luke says:

    I was not aware of this being passed. Thanks for making me aware of it, Jim. I wold agree with DIY Investor that our politicians seem to have forgotten that Social Security is bleeding.

  6. eric says:

    For my income level, 2% makes a bigger difference than $400 certainly. What I’m more concerned about is how this affects (hastens?) the impending SS problem in the first place.

  7. Brian says:

    Time to bump the 401k by 2%.

    • daenyll says:

      I never really expected I’d see any SS by my retirement in the 2050′s but things just keep getting more and more edged to certainty that it won’t be there. Savings time, only person you can rely on to watch your own interests is yourself…

    • DIY Investor says:

      Although this frustrates the grand poohbah policy makers it is an excellent suggestion.
      The policy makers want you to march down to Best Buy and purchase a big screen TV so they will end up hiring more clerks.

  8. Andy says:

    How about those living on a pension? NoFICA is
    deducted, so we get no stimulus benefit. Couple that with no COLA for SS and it’s a double whammy

    • govenar says:

      Is it at least no worse than last year? (I’m guessing you also didn’t get the Making Work Pay credit if you’re getting a pension rather than wages?)

    • NateUVM says:

      How is it a “whammy” at all if you weren’t paying the tax to begin with…?

      • Scott says:

        Well said, NateUVM. I think people complain just because they “want some too”.

        I did too when I made too much for the “make work pay” payback.

    • Rachel says:

      Well, many people are not lucky enough to get a pension, so pension and ss received, you are one of the lucky ones. I would much rather have the pension than $2k less in taxes.

  9. Pamalah says:

    The government has been using SS monies collected for 60 or 70 years, instead of saving it and investing it. Instead, Bush cut taxes mostly for the richest Americans who did not really need it. Now, that it is getting time for us to collect our SS monies, they are going to dump it. Watch what happens in the next couple of years. Very upsetting.

    • Jen says:

      “Instead, Bush cut taxes mostly for the richest Americans who did not really need it.”

      But he DID give back to the ones that PAID it in the first place. I’m sorry you think we should take their money and give it to the ones that NEED it. I guess the ones that you think NEED it do need it to pay for their piercings, tatoos, alcohol and drugs. As a teach of inner city public school children, the families that need it the most always seem to come up with money for cell phones and cable. Yet, they never seem to have money for medical insurance. Funny how that works.

      • Mark says:

        Jen – I hate that you’re a teacher and can’t think. So sad for your students.

        Cable – $120
        Cell – $200 (say for a family of 4 – probably not what your “inner city” kids even have)
        Total – $320

        Insurance – $1,130
        That’s if you’re lucky enough to have an employer who covers most of your costs. If you forgo your own health insurance for your children, you’ll probably pay even more per child on an individual plan.

        I think its dumb and selfish to have children when you can’t afford them. Unfortunately, the kids don’t have a choice. If you want to be a member of a society who does not care about the others around them, I’m sure you could find a third world country like that somewhere on the map. An educated person would understand that you will either benefit from or suffer the consequences of what these poorer children have or don’t have. You won’t realize it until they’re older.

        It’d be nice if we had a choice to be born, but we’re forced into it – good or bad parents, we have no choice. So yes, there are people that NEED it. And yes, there are people who it could come from to make not only the ones in need have a better life, but society and therefore themselves have a better life. Those people wouldn’t even notice the difference.

  10. scdavid says:

    I agree. This is going to be real tough to reverse. I can’t see the government giving almost everyone essentially a 2% paycut one year from now.

  11. Andy says:

    It’s a whammy because the past stimulus programs benefited everyone. This one only benefits the employed

    • Jim says:

      Federal unemployment benefits were extended… so some of the unemployed benefited as well.

      • jeremy says:

        Andy,
        Why do you think you should get a check if you dont pay tax to begin with.
        This is a tax cut not free money.
        We really did pay the money in.
        You just want a hand out.
        You need to wise up.

        • Rachel says:

          Exactly! Some of us have never used the unemployment or any other benefit that we have paid in for YEARS! Well said Jeremy!

        • chorner says:

          Did you take into consideration that before retirement Andy paid HIS dues and that the government has been robbing HIM alot longer than it has been robbing YOU?

    • NateUVM says:

      How about the “whammy” that everyone else has had to endure in the meantime while you don’t have to worry about FICA…?

      You’re already in the “stimulated” position that a 2% reduction in FICA moves the rest of us toward.

      I’m sorry, I just wouldn’t feel that aggrevied if someone else, who’s been paying a tax or fee or whatever that I’m not paying, all of a sudden gets it lessened. I don’t really feel all that much sympathy for others in that situation, either.

      Put it this way… If the price of compact discs were to fall by 50%, should I be upset if I don’t happen to buy compact discs…? Seems kinda silly.

      But that’s sort of what you are saying when the rest of us, who are “buying” a benefit from the government, are getting the cost of that benefit reduced. Nevermind the fact that the reduction in that price may make it difficult for the government to step up and actually provide that benefit.

    • ahaus says:

      You are looking at this wrong. They are not giving anybody money…They are just taking away less. It is not the government’s money it is ours!

  12. harry says:

    Although our taxes are going down by 2%, the social security’s fund will still receive 6.2%. 4.2% from the public, and the other 2% will be from IOU’s from the US general fund, which will further increase our debt…

  13. Jeff says:

    NateUVM,

    People who don’t pay FICA still have junk taken out of their paycheck for retirement….probably more than what FICA is in the first place. I just goes to a different place and money going out of their paycheck is not being lessened by this “stimulus”.

  14. Paula says:

    It like someone said. SSI still gets the 2% in the form of an IOU…..We know what that means. It will never get to the account. Take your 2% and bump up your 401K. That is what I will be doing. Actually I have already done it so it will take place in January. We have to plan and save for our own retirement. We can’t rely on SSI anymore.

  15. LARRY SMITH says:

    I jusat got my first paycheck of 2011 my check went down 10.00 ??? where is this 2% ???

    • LaVonda says:

      Your check went down because the federal tax rates went UP!!!

      • Jim says:

        Federal tax rates did not go up.

        • SmokeScreen says:

          Yes they did go up. Although there is a 2.2%cut on social security taxes, federal income taxes are raising due to the making work pay credit (Bush cuts) expiring Dec 2010. In other words “our” money that is deducted for retirement has been lowered. The money that goes to “Uncle Sam” has been increased. A good thing? I think not.

        • Dean Turner says:

          Hate to tell you Jim. But the amount taken for Federal withholding out of my check increased by .9 of a percent. No. There were not any changes in the gross pay or other deductions. State tax deducted the exact same amount. SS went down exactly 2%. You can spin it any way you want to. But at the end of the day, the federal tax rate has increased.

        • Jen says:

          Actually if you read the health care bill, they are now going to tax you on MORE than your income. The rate didn’t go up but the amount they tax went up. They will now tax you on the amount of your benefits paid by your employer even though you do not recieve that money as wages.

          For example, if you make $40,000 a year but receive $3000 in employer benefits, you will be taxed on $43,000 in 2011. Nobody saw that little morsel. The health care reformed bill is found at http://www.thomas.gov Happy reading!

          • Gabe says:

            That site conveniently leaves out some key information about the new “tax hike”. I am not necessarily for one side or the other, I just like the truth (in whole). The government is only adding taxes to those “highly compensated” employees. Anybody who receives more than $23k in health benefits will have 40% the amount over $23k applied to their adjusted gross income. You should look at the tax code mentioned on that website for further information.

  16. Gail says:

    I just got my first check and it went down 14 dollars!! Anybody know why that is? My HR Director is an idiot and has yet to answer the question.

    • Craig says:

      Well the making work pay (400 $ per year) expired and the beginning of 2011. I’m assuming your health care costs went up. Maybe that’s how you are in the hole 14 dollars

    • Kate Kashman says:

      While the payroll tax is being reduced for 2011, the previous tax reduction (“stimulus check 2010″) expired. The Making Work Pay tax credit included a provision for reduced withholding through the year (vs. getting a chunk back on your tax return, or getting a stimulus check). Since that credit expired, income tax withholding has reverted to its previous rate.

      As Jim said, the 2011 version is more generous than the 2010 version, so in the long run your check should go up. However, payroll systems are still trying to make adjustments to their systems. You should see the whole thing settle out within a month or so. (Much better than 2009, when it was April before everything was properly organized!)

      Hope that helps…it is ridiculous that it is so complicated to explain.

  17. DRII says:

    Just saw pending deposit for first pay-check of the year; did increase over $20.00…

  18. Jesse says:

    @Jeff

    You comment makes no sense.

    “People who don’t pay FICA still have junk taken out of their paycheck for retirement….probably more than what FICA is in the first place. I just goes to a different place and money going out of their paycheck is not being lessened by this “stimulus”.”

    A Pension is not a “Paycheck” to be debited towards fica. If you are working and getting paid then your Paycheck will be deducted for FICA or you will owe it at the end of the year. If you are getting money and not being forced to pay FICA then why do you care that my paycheck just went up by a whole 12 dollars!

    By the way no one has mentioned that although SS went down by 2% my Fed Tax witholding went up by 1.2%!! wow great stimulus. :(

  19. Holly says:

    The Making Work Pay tax credit (the tax cut nobody knows Obama passed) has been in effect for 2009 and 2010. It is going away in 2011. For the last two years, the federal withholding tables have been modified to take the MWP into consideration and so federal withholding has been lower than normal. For 2011 the tax tables go back to normal. That is why the federal withholding is increasing.

  20. Laura says:

    My first paycheck for January was $10 less as well. The reduction in my SS withholding amount did not make up for the increase in the federal income tax deduction. Some “stimulus.”

    I also note that the employer contribution to SS for each employee remains the same. . . employee pays in 4.2%. . . employer still pays in 6.2%. Have employers complained about that?

  21. BOB says:

    Free Money, giveaway. Call it what you want, it is doing nothing more than making for lazy, dependent on government, better off not working citizens. It used to be that if we were out of work for 6 months we were cutoff and had to take a job even if it wasn’t in our field. Now we sit around waiting for the government to create a job that fills our job description. A few more years of this and the terrorists can offer to bail us out by taking over our country.

  22. Not Surprised says:

    Like anyone in my generation will ever see social security, funds are depleting rapidly so why not enjoy a little money now.

  23. Wayne Youngblood says:

    My retail store pays average employee earnings of about $20,000. When our net checks did not increase, I learned from my payroll preparer that the $400/annual MAKING WORK PAY CREDIT expired which resulted in an increase of about 2% in federal withholding taxes. That increase offset the 2% point reduction in the FICA tax, so our checks remained about the same!!!
    And now I have to listen to the politicians crow abuot the stimulus of the payroll tax credit?? GIVE ME A BREAK!

  24. Ross says:

    It’s a pretty sad state to see people just resigned to the idea that they won’t get SS when they retire.

    It’s called an entitlement because you’re entitled to it. You’ve been paying into it every day that you’ve worked.

    It should be political suicide for any politician to advocate for cuts to social security. Instead, we’re all just convinced that the system is doomed and find some kind of personal principle in the idea that “I’m not expecting social security when I retire.”

    We’ve become a bunch of principled suckers.

  25. Anonymous says:

    just take it and run!!!!!!!!!


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