Learn About FICA, Social Security, and Medicare Taxes

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Your Social Security and Medicare taxes add up to 7.65% of the money you make. Your employer will match that amount—and provide the government with total FICA taxes representing 15.3% of your earnings. For 2022, you pay Social Security taxes on any earnings up to $147,000; your employer will withhold 6.2% of each paycheck to cover your obligation. While FICA taxes are automatically taken out of your paycheck as an employee, you’ll need to pay close attention if you change jobs or have more than one. You want to be sure you’re not paying more than you’re required to. And if you’re self-employed, you’ll need to use the IRS worksheets to ensure you’re paying the correct amounts.

This is your Social Security Benefit Statement, or SSA-1099, and can be used to figure out how much you owe when you are filing your federal tax return. The rules of the Internal Revenue Service dictate that many who receive Social Security benefits will have to pay an income tax on that money. A single person with $140,000 in taxable income in 2024 would be in the 24% tax bracket. Their effective tax rate would be much lower than that top rate. This implies you’ll pay 6.2 percent of your earnings up to $147,000 in Social Security taxes. Your earnings beyond that threshold will not be taxed for Social Security.

Advantages and Disadvantages of Income Caps

This includes salary, bonuses, commissions, tips, overtime pay, sick pay and premiums on some types of insurance. The Medicare tax is a tax charged to individuals in order to fund the Medicare system. The tax is charged to people on their paychecks, much like the Social Security tax. The Medicare tax rate is 2.9% which is split between the employer and the employee.

You must send FICA tax deposits—along with amounts withheld from employee pay for federal income tax—to the IRS periodically. You must make deposits of these amounts either semi-weekly or monthly, depending on the average size of deposits for the past year (new businesses deposit monthly). The amount your employer sets aside for FICA is based on percentages set by the federal government. As for federal, state and local income taxes, the amount your employer withholds will usually depend upon the information you provided when filling out your W-4 Form or a similar state or local form.

  • The Medicare tax rate is a flat 1.45% of your wages, so you will pay this no matter how much you make.
  • The employee will report and pay all Additional Medicare Tax liability, including any liability that exceeds Additional Medicare Tax withheld, on the employee’s individual income tax return.
  • The threshold applicable to an individual’s filing status is applied separately to RRTA compensation and self-employment income.
  • Your employer will match that amount—and provide the government with total FICA taxes representing 15.3% of your earnings.
  • You cannot honor a request to cease withholding Additional Medicare Tax because you are required to withhold it.
  • The upshot is that, while no one likes taxes, with FICA you can count on the government paying back your contributions in the form of retirement and healthcare benefits.

It helps to have an accountant or accounting software to help estimate how much you should pay every quarter to stay on top of your FICA and Medicare taxes. You may owe some taxes at the end of the year if you take more allowances. If you make a lot of money from self-employment, you may want to work with an accountant. They can help you figure out how much money you should save for taxes. That way, it can keep running until you’re ready to retire or you have a disability. The tax is smaller than the rest of FICA, but it’s an important part of taxes overall.

Calculating the withholding and employer’s portion amounts

If you are liable for Additional Medicare Tax and/or your employer withheld Additional Medicare Tax from your wages or compensation, you must file Form 8959. There are no special rules for nonresident aliens and U.S. citizens living abroad for purposes of this provision. Wages, other compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold.

Why do I have to pay FICA tax?

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Who pays Social Security and Medicare taxes?

On December 1, you are required to withhold Additional Medicare Tax on $20,000 of the $50,000 bonus. You may not withhold Additional Medicare Tax on the other $30,000. You must also withhold the additional 0.9 percent Medicare tax on any other wages paid to Trevor in December 2022.

How does FICA impact your Social Security and Medicare benefits in retirement?

Collectively, the employee and employer contributions are called FICA taxes. While both these taxes use the gross wages of the employee as the starting point, they are two separate components that are calculated independently. The Medicare and Social Security taxes rarely affect your federal income tax or refunds. In the calendar year 2023, the Social Security payroll tax rate of 6.2% is applied to each employee’s earnings up to the maximum of $160,200.

D must pay the remaining Additional Medicare Tax liability on $75,000 through increased income tax withholding, estimated tax payments, or payment with D’s income tax return. If D requests additional federal income tax withholding, half of this additional withholding stocksfortots must be credited to C. However, if D makes estimated tax payments, these payments will be credited entirely to D. If C and D make joint estimated tax payments, these payments may be divided between them as agreed or in proportion to their tax liability.

Identifying Taxable Workers

Your employer is also responsible for paying half of the total FICA obligation. Answer simple questions and TurboTax Free Edition takes care of the rest. Get unlimited live help from tax experts plus a final review with TurboTax Live Assisted Basic. This is often called the “Additional Medicare Tax” or “Medicare Surtax.”  In 2023, it’s also important to keep in mind that only the first $160,200 of earnings is subject to the Social Security part of the FICA tax. Similarly, the current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total. If you work for yourself, you can also consider switching to working for an employer.