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What Is Social Safety Tax?

Employers are answerable for withholding, remitting, and submitting payroll taxes on behalf of their staff. And, there are some taxes you contribute on behalf of your staff. Social Safety tax is a kind of important taxes that impacts each the employer and the worker.

Maintain studying to seek out out the solutions to questions like:

  • What’s Social Safety tax?
  • What are Social Safety taxes used for?
  • How a lot is Social Safety tax?
  • How do you calculate Social Safety taxes?
  • The place and the way do you report Social Safety tax?

What’s Social Safety tax?

Social Safety is a compulsory payroll tax paid by employers and staff. Employers and staff in the US should pay the tax. Because of this not solely do employers have to withhold Social Safety taxes from worker wages, however additionally they have to pay social safety match, which equals the worker tax, and deposit each parts to the Social Safety Administration. 

Social Safety is likely one of the two Federal Insurance coverage Contributions Act (FICA) taxes. The opposite is Medicare tax. 

In case you are self-employed, you don’t pay Social Safety tax. As an alternative, you pay self-employment tax. Self-employment tax is just like paying each the employer and worker portion of the whole FICA tax. The Self-Employed Contributions Act (SECA) mandates self-employed people to pay this tax. 

Tax charges are topic to alter yearly, and that may imply making year-end adjustments.

Obtain our FREE information, End This 12 months’s Payroll With Ease, to get a guidelines of your year-end duties.

What are Social Safety taxes used for?

The federal authorities makes use of Social Safety taxes to fund Social Safety advantages. The Social Safety Administration (SSA) administers this system and makes use of the tax funds to assist:

  • Retired people
  • Widows and widowers
  • People with disabilities
  • Youngsters and survivors of people

The official title for Social Safety is Previous-Age, Survivors, and Incapacity Insurance coverage (OASDI). Most people who obtain the tax profit are 65 years or older. Survivors’ funds are for the surviving spouses or youngsters of deceased employees or retired employees. 

How a lot is Social Safety tax?

So, what’s the Social Safety tax price? The overall quantity of Social Safety tax is a flat price of 12.4%. However, each the employer and worker pay half of the tax. The employer pays 6.2%, and the Social Safety worker tax can also be 6.2%. Withhold the proportion from the worker’s gross taxable wages and contribute your half based mostly on the worker’s gross taxable wages. 

Social Safety taxes have a wage base. So, solely a certain quantity of worker wages are topic to Social Safety tax. The Social Safety tax restrict 2023 is $160,200. 

What does a wage base imply? The wage base for Social Safety implies that you cease withholding and contributing to the tax for an worker as soon as their wages attain the wage base for the calendar 12 months. Wage bases have a tendency to extend yearly to accommodate the rising price of dwelling. 

The mixed (Social Safety and Medicare) FICA tax price is 15.3%. Like Social Safety, Medicare tax is break up in half and paid by each employers and staff (2.9% complete, 1.45% every). The wage base for Social Safety does not apply to Medicare tax. You could proceed withholding Medicare tax as soon as an worker’s wages hit the Social Safety wage base. Medicare consists of a further tax price of 0.9% on wages over $200,000. 

2023 FICA tax breakdown

Sometimes, Social Safety tax is paid on an worker’s wages no matter their age or if they’re receiving Social Safety advantages. Nevertheless, some wages, comparable to worker expense reimbursements, are exempt from Social Safety tax. You’ll be able to study extra about exempt wages in Publication 15.

How do you calculate Social Safety tax?

To calculate the Social Safety tax, multiply the worker’s gross taxable wage by the Social Safety tax price. Pay frequency doesn’t matter. You at all times calculate the tax the identical method. 

Say you pay an worker $1,000 in gross wages. Multiply the $1,000 by 6.2% to find out how a lot to withhold from the worker’s wages. Since you contribute the identical quantity, use the calculated quantity to find out how a lot you contribute.

Social Safety tax = $1,000 X 0.062 = $62

Withhold $62 from the worker’s wages and contribute $62 for the employer portion of the tax. 

As soon as the worker earns $160,200 in 2023, cease withholding and contributing Social Safety tax on their wage. If the worker’s wages by no means attain the annual wage base, don’t cease withholding and contributing the tax. 

The place and the way do you report Social Safety tax?

Most employers should report FICA taxes and federal revenue tax withholding on a quarterly foundation utilizing Kind 941, Employer’s Quarterly Federal Tax Return. Report the whole quantity withheld and contributed for Social Safety for all staff. 

Some employers can use Kind 944, Employer’s Annual Federal Tax Return, to report Social Safety taxes withheld and contributed. The annual kind additionally studies Medicare and federal revenue taxes. The IRS notifies relevant employers if their enterprise qualifies to make use of Kind 944. Sometimes, relevant employers are these with a complete federal revenue, Social Safety, and Medicare tax legal responsibility of lower than $1000 yearly. Don’t use Kind 944 until the IRS tells you to. 

After you full the suitable kind, mail it to the IRS. Use the IRS Kind 941 web site to find out the place to file your quarterly return. Annual filers can use the IRS Kind 944 web site for extra info on the place to mail their return. 

By January 31 annually, you’ll give every of your staff a Kind W-2. This way lists the quantity of all of the employment taxes you withheld from their wages throughout the earlier 12 months. 

Additionally, you will submit Kind W-2 and Kind W-3 (the abstract transmittal kind) to the Social Safety Administration, which information the taxes withheld for the 12 months. Kinds W-2 and W-3 have to be filed by January 31. You might also need to submit these types to the state tax company.

How do you pay Social Safety taxes?

Deposit Social Safety taxes (together with Medicare and federal revenue taxes) on both a month-to-month or semiweekly foundation. Your deposit schedule is predicated on a lookback interval of the taxes you beforehand reported on Kind 941 or Kind 944. You’ll be able to study extra concerning the lookback interval and learn how to decide your deposit schedule in Publication 15. Your lookback interval can change, so be sure to confirm your lookback interval earlier than the start of each calendar 12 months.

You could use EFTPS to deposit your payroll taxes. Late tax deposits could also be topic to a price.

This text has been up to date from its authentic publication date of October 19, 2015.

This isn’t supposed as authorized recommendation; for extra info, please click on right here.

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