Jan 132015
 
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​2015 Payroll Tax Changes

The 2015 Social Security wage base has increased from $117,000.00 to $118,500.00. As in prior years, there is no limit to the wages subject to the Medicare tax; therefore, all covered wages are still subject to the 1.45 percent tax.

Wages paid in excess of $200,000 in 2015 will be subject to an extra 0.9 percent Medicare tax.

The FICA tax rate, which is the combined Social Security tax rate of 6.2 percent and the Medicare tax rate of 1.45 percent remains at 7.65 percent for 2015. The maximum social security tax employees and employers will each pay in 2015 is $7,347.00.

Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Feb 202014
 
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Tax Tip: Social Security

The Social Security wage base increases for 2014 to $117,000, up by $3,300 from 2013. The tax rate imposed on employers and employees remains at 6.2%. The Medicare tax rate also remains stable for 2014 at 1.45% for employers and employees. However, the 0.9% Medicare surtax applies to single individuals with wages exceeding $200,000 and couples earning more than $250,000. The surtax doesn’t affect the employer’s share. Self-employed individuals are also subject to the surtax.

Social Security benefits increased by a mere 1.5% in 2014, due to low inflation. The earnings limits are increasing as well. Individuals who become age 66 in 2014 do not lose any benefits if they make $41,400 or less prior to reaching age 66. Individuals between ages 62 and 66 by the end of 2014 can make up to $15,480 without losing any of their benefits. There is no earnings maximum once an individual becomes 66 years of age. The amount needed to qualify for coverage increases to $1,200 per quarter. Therefore, earning $4,800 anytime during 2014 will net the full four quarters of coverage.

The threshold for the nanny tax increases to $1,900 for 2014.

 

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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Nov 092013
 
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 Social Security wage base rises to $117,000 for 2014

The amount of earnings subject to taxation for purposes of calculating social security tax is called the social security wage base.  This wage base changes each calendar year based on the national average wage index.   The payroll tax deduction is actually based on two components:  (1) Old-Age, Survivors, and Disability Insurance, or OASDI, and (2) Medicare Hospital Insurance, or simply Medicare.

Social secruity

Social security (Photo credit: SalFalko)

The OASDI rate is 6.2% and is set by statute.  This tax is paid by both the employee and the employer.  The maximum deduction from an employee’s wages for calendar year 2014 is $7,254.00.  This amount is calculated by multiplying the maximum wage base ($117,000 for 2014) by the OASDI rate of 6.2%, i.e., $117,000 x 6.2% = $7,254.00.

The Medicare rate is 1.45%.  Since 1994, this tax has had NO maximum amount of wages, or wage base.  It is calculated in the same manner as OASDI, but without regard to any limit on the amount of wages.  Therefore, an employee with taxable wages of $125,000, for example, would have a deduction of $1,812.50 ($125,000 x 1.45%).

The combined total payroll tax deduction for Social Security and Medicare would be $9,066.50 ($7,254.00 + $1,812.50)  This amount is paid by both the employee and the employer.  Therefore, the amount of Social Security and Medicare tax paid based on this scenario would be $18,133.00.

New for 2014 – The additional Medicare tax of 0.9% applies to wages exceeding $200,000 for single taxpayers and $250,000 for married taxpayers filing jointly.  This tax is paid only by the employee.  There is no employer portion for this tax, although employers must withhold the employee portion.

Social Security wage base rises to $117,000 for 2014.

For more information and tax tips or assistance with calculating payroll tax deductions, contact me using the form below.

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Disclosure of Material Connection: Some of the links on this blog are “affiliate links.” This means if you click on the link and purchase the item, I might receive an affiliate commission. Regardless, I only recommend products or services I use personally and believe will add value to my readers. I am disclosing this in accordance with the Federal Trade Commission’s 16 CFR, Part 255: “Guides Concerning the Use of Endorsements and Testimonials in Advertising.”

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