The Social Security Administration announced recently that the Maximum Taxable Earnings or Social Security Wage Base would not change for 2010. Since there was no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2009, the Social Security Wage Base will remain at $106,800. There is no provision for a Cost-of-Living Adjustment (COLA) when there is no increase in the CPI-W. Wages are taxed at 6.2%, so the maximum tax to be paid by each employee will be $6,621.60. About 7% of workers who pay Social Security Tax are expected to reach the maximum in 2010.
For workers under full retirement age, $1 in benefits will be withheld for every $2 above the Retirement Earnings Test Exempt Amount of $14,160 per year or $1,180 per month. The year an individual reaches full retirement age, $1 in benefits will be withheld for every $3 above the Retirement Earnings Test Exempt Amount of $37,680 per year or $3,140 per month. The month an individual reaches full retirement age there is no limit on earnings. These amounts are unchanged from 2009 to 2010.
One amount that did increase for 2010 is that amount needed to earn a Social Security credit, formerly known as a quarter of coverage. In 2009, a credit is earned for every $1,090 of earnings, up to a maximum of four credits. That amount will increase to $1,120 in 2010.
Contact Vision Payroll if you have any questions on the Social Security changes for 2010 or get further information at Important Facts and Figures.