• The IRS has released a notice warning employers that they may not be withholding enough taxes. It urges all employers to read the notice. The notice is quoted in full below:
Until this year, most employers used two tables to withhold federal tax from employee earnings, one for income tax and the other for social security and medicare taxes. For 1991, three tables in Circular E, Employer's Tax Guide, are needed because, in addition to income tax withholding, the law changed to divide social security and medicare into separate categories.
While this total rate for both taxes is 7.65%, the same total as last year, the 6.2% social security tax is withheld on the first $53,400 of wages and the 1.45% medicare tax is withheld on the first $125,000 of wages. Thus, most employers will have to use BOTH the 6.2% and 1.45% tables on pages 44 and 46 of Circular E.
Social security and medicare taxes ...