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Your Raise From Uncle Sam Might Take a While

Congress has finally approved the tax legislation, but it could be a while before workers see the changes reflected in their paychecks.

Payroll companies will be updating their systems well beyond the eleventh hour and testing any system changes usually takes at least two weeks, the Wall Street Journal’s Laura Saunders reported this week.

The end result: A likely spate of wacky paychecks as payroll companies scramble to update their programs with the latest tax code— and iron out any kinks — all during the height of vacation season (think payroll company managers answering calls from Christmas dinner or on line at Disney with their kids).

The temporary 2% Social Security tax cut, which would max out at $2,136 a year for those who earn $106,800 or more will mean about $82 extra in a paycheck every two weeks (for those earning $106,800 or more). But it’s highly likely, say payroll companies, that those first paychecks in 2011 might not reflect those raises from Uncle Sam since even a Christmas miracle won’t speed up the time and effort it takes to upgrade their payroll programs.

And that means workers could also see a few whopper paychecks sandwiched in–for that top earner, that could mean no change the first two checks, then one check at $82 extra, another at $246 extra before settling into what will be a typical paycheck for the rest of the year.  Not so bad for paying those holiday bills that roll in during January, but still, any uncertainty in paychecks is bound to cause some concern for workers–and a litany of memos from HR about what, exactly is happening.

Readers, has your company made any preemptive announcements about when to expect to see the payroll tax cut in your check? How do you expect the one year raise from Uncle Sam to affect your budget next year?


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About The Tax Blog

  • The Tax Blog brings together a team of award-winning tax journalists from the Dow Jones network and around the web to examine the tax issues, changes and legislation that affect families, investors and small business owners. Our contributors include Tax Report columnist Laura Saunders (WSJ), Tax Guy columnist Bill Bischoff and senior reporter Jilian Mincer (, retirement-focused reporter Anne Tergesen (WSJ), wealth management writer Arden Dale (Dow Jones Newswires), TaxWatch columnist Eva Rosenberg and personal finance reporter Andrea Coombes (MarketWatch), and reporter Alyssa Abkowitz (SmartMoney). They’ll provide the latest news and insight, mine the tax code for tips and loopholes, and answer your questions about tricky tax situations. Contact the The Tax Blog with ideas, suggestions or tax questions at