Everything You Need to Know About FICA Tax Rates
- October 13th, 2014
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Employers have a number of obligations when it comes to payroll taxes; in addition to paying their own portion of Social Security and Medicare taxes, they also have to withhold employees’ wages and make those payments to the government at the end of the year. The Federal Insurance Contributions Act (FICA) is the federal law that determines the amount that both employers and employees need to pay in federal taxes.
Employee FICA tax rates include:
- A 6.2% Social Security tax;
- A 1.45% Medicare tax; and
- As of 2013, employees who earn over $200,000 are also obligated to pay a 0.9% Medicare surtax.
These taxes are withheld from an employee’s paycheck every pay period by the employer, and are paid at the end of the tax year by the employer.
In addition to the employee portion of FICA tax rates, employers are required to pay:
- A 6.2% Social Security tax; and
- A 1.45% Medicare tax.
Employers are not responsible for contributing an equal part of the new Medicare surtax that was put in play in 2013. Beside that surtax, though, employers are required to pay just as much as employees for their Social Security and Medicare taxes. The only time this isn’t the case is when employees make tips, in which case there are different rules that apply.
As such, this means that FICA taxes are a pretty significant chunk of an employee’s wages. The 6.2% that you withhold from your employee’s wages for Social Security tax, added to the 6.2% that you pay on top of that totals 12.4% of the employee’s total wages. The 1.45% withheld from the employee’s wages for Medicare tax, combined with the 1.45% that you pay in addition totals 2.9% of the employee’s total wages. That means 15.3% of the employee’s wages go to FICA taxes alone. And that’s if the employee isn’t making over $200,000; if the employee’s wages exceed $200,000, any amount in excess is charged an additional 0.9% as a Medicare surtax.
Let’s look into that Medicare surtax a little bit more. How exactly is it taken?
The 0.9% Medicare surtax that was put into effect in 2013 is only applied to the employee wages, and imposes no obligation on the employer to match it. Employers are required to withhold FICA taxes from an employee’s wages for every pay period during the year. The Medicare surtax is only withheld beginning in the pay period in which the employee’s wages exceed $200,000. That means that once an employee’s net pay for the year exceeds $200,000, the 0.9% Medicare surtax is withheld for that pay period and every pay period thereafter through the end of the calendar year.
Do you have more questions about FICA tax rates? Call the experienced tax professionals at JRH & Associates at (516) 794-5752 for answers today!