Social Security and Medicare taxes
This entry pertains specifically to the requirements for U.S. employers to withhold Social Security and Medicare taxes from an employee's wages in order to pay them to the U.S. government through the Internal Revenue Service.
The Federal Insurance Contributions Act (FICA) provides for a federal system of old-age, survivors, disability, and hospital insurance. The old-age, survivors, and disability insurance part is financed by the social security tax. The hospital insurance part is financed by the Medicare tax. Each of these taxes is reported separately.
Generally, an employer is required to withhold Social Security and Medicare taxes from employees' wages and must also pay a matching amount of these taxes. Certain types of wages and compensation are not subject to social security and Medicare taxes.. Generally, employee wages are subject to social security and Medicare taxes regardless of the employee's age or whether he or she is receiving Social Security benefits.
Tax rates and the social security wage base limit. Social security and Medicare taxes have different rates and only the social security tax has a wage base limit. The wage base limit is the maximum wage subject to the tax for the year. Determine the amount of withholding for social security and Medicare taxes by multiplying each payment by the employee tax rate. There are no withholding allowances for social security and Medicare taxes.
As of 2010, the employee tax rate for social security is 6.2% (amount withheld). The employer tax rate for social security is also 6.2% (12.4% total). The 2010 wage base limit is $106,800.
As of 2010, the employee tax rate for Medicare is 1.45% (amount withheld). The employer tax rate for Medicare tax is also 1.45% (2.9% total). There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax.
- Note: The information in this entry is date-sensitive so please refer to the IRS Publication 15: Employer's Tax Guide for most current information regarding rates and withholding limits. (Also, if it is out of date, please edit this entry with newer data from that publication, also.)
- See sections 5 and 15 of the IRS Employer's Tax Guide for details