New Year, New Tax Laws: 2011 Payroll Tax Holiday

Small businesses aren’t the only ones affected by the for 2011, just one of the tax law changes for this year. People who have rental property and pay vendors to keep it going have to prepare 1099s as well. Say you’re renting your condo out. If you pay more than $600 to a management association  and to utility companies, you have to give the management  and utility companies Form 1099s, according to Certified Public Accountant George H. Kresslein, Jr. Kresslein has an Annandale firm which specializes in taxes and small business consulting.

Another tax change businesses should be aware of is the 2011 payroll tax holiday. As of Jan. 1, workers are seeing a little more take-home pay as a result of the holiday, which lowers the amount of taxes withheld to 4.2 percent, down from 6.2 percent. However, employers are still responsible for matching the original 6.2 percent.

Additionally, there’s been a change in how employers remit those tax payments to the IRS. Employers used to be able to make cash deposits to the bank, but no longer. Federal tax deposits have to be made through the electronic funds transfer payment system through the IRS.

“The IRS wants to get away from paper,” Kresslein said. “They’re trying to go all electronic.”

Even if you’re not technologically  savvy or don’t want to make payments over the Internet, the transfers can be made over the phone, Kresslein said.

The change makes it easier to verify that the IRS has received those payments, Kresslein said. “This gives you better traceability and accountability and makes life easier on the IRs. This is a much better way to go.”

Check Annandale Patch tomorrow for part 3 of our New Year, New Tax Laws series.