Federal Income Tax and Social Security and Medicare Taxes

You generally must withhold federal income tax from your employees' wages. You withhold part of Social Security and Medicare taxes from your employees' wages and you pay a matching amount yourself. To figure how much to withhold from each wage payment, use the employee's Form W-4 and the methods described in Publication 15, Employer's Tax Guide and Publication 15-A, Employer's Supplemental Tax Guide (PDF).The Internal Revenue Service recently released instructions to help employers implement the 2011 cut in payroll taxes, along with new income-tax withholding tables that employers will use during 2011.Employers should start using the new withholding tables and reducing the amount of Social Security tax withheld as soon as possible in 2011, but not later than Jan. 31, 2011.Notice 1036 (PDF) contains the percentage method income tax withholding tables, the lower Social Security withholding rate, and related information that most employers need to implement these changes. Publication 15, (Circular E), Employers Tax Guide (PDF), contains the percentage method tables and the wage bracket tables that some employers use.