Vision Payroll

December 24, 2010

Question of the Week: What is the Maximum Amount of Social Security Withholding Tax for 2011?

What is the Maximum Amount of Social Security Withholding Tax for 2011?
What is the Maximum Amount of Social Security Withholding Tax for 2011?
This week’s question comes from Adrienne, a sales manager. I normally earn in excess of the FICA limit ($106,800 in 2010 and 2011). I know the social security withholding rate has been reduced for 2011. What is the maximum amount of social security withholding tax  (sometimes called FICA tax)for 2011? Answer: The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (2010 Tax Act) reduced the rate for social security withholding tax (sometimes called FICA tax) from 6.2% to 4.2%. Since the wage base remains at $106,800, the maximum social security withholding tax for 2011 by one employer from one employee will be $4,485.60 ($106,800 X 4.2%).

Employer Withholding Rate Remains at 6.2%

There was no change in the rate of social security tax paid by an employer on an employee’s wages. Since the rate remains 6.2%, the maximum employer social security tax for 2011 by one employer for one employee will be $6,621.60 ($106,800 X 6.2%).

Employees May Have More Withholding if They Have Two or More Jobs

The wage base is generally applied on an employer-by-employer basis. Employees who earn more than $106,800 combined at two or more jobs could have social security withholding in excess of $4,485.60 in 2011. Withholding will stop at a job only when the employee reaches the maximum at each individual job. There are exceptions to this rule for situations such as common paymasters and successor employers.

Employees Can Receive Credit on Form 1040 for Excess FICA Withholding

Even though the employer must pay the full tax and withhold it from the employee, amounts withheld above the maximum can be claimed as a credit on Form 1040. For tax year 2010, enter any excess FICA tax withheld by two or more employers on line 69 of Form 1040 and reduce your balance due or increase your overpayment by the amount of the excess.

Contact Vision Payroll for More Information on Social Security Withholding Tax

Contact Vision Payroll if you have any questions on social security withholding tax or visit our Important Facts and Figures page for further information.

July 5, 2010

Impact of the Small Business Health Care Tax Credit on Employment Tax Payments

The new health reform law gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Over several weeks, Vision Payroll will be providing further information on the Small Business Health Care Tax Credit. Today’s topic is Impact of the Small Business Health Care Tax Credit on Employment Tax Payments.

Employers may not reduce the amount of employment tax payments paid and use the Small Business Health Care Tax Credit to offset the taxes not paid. Federal employment taxes include both those imposed on the employer and those imposed on the employee. They include federal unemployment tax, the employer portion of Old-Age Survivors and Disability Insurance (OASDI) tax, also known as social security and Medicare, federal income tax withheld, social security tax withheld, and Medicare tax withheld. The Small Business Health Care Tax Credit may only offset income tax.

The next topic to be covered in this series is Transition Relief for Employers That Do Not Pay a Uniform Percentage. Contact Vision Payroll if you have further questions on Impact of the Small Business Health Care Tax Credit on Employment Tax Payments.

December 5, 2008

Question of the Week: Why Didn’t My FICA Tax Deduction Stop?

This week’s question comes from Janet, a sales rep: I read before that the wage base for 2008 was $102,000. I’ve made over $104,000, but FICA tax is still being withheld. Why didn’t my FICA tax deduction stop? Answer: Even though your gross wages are over $104,000, the FICA tax deduction doesn’t stop until FICA taxable wages reach $102,000 and FICA tax withheld reaches $6,324. Some wage deductions such as cafeteria or §125 plan deductions reduce the amount of FICA taxable wages. So, even though your gross earnings are over $102,000, FICA tax must be withheld until the maximum withholding is reached. Contact Vision Payroll if you have any questions on the Social Security wage base.

November 28, 2008

Question of the Week: Why Didn’t My FICA Tax Deduction Stop?

This week’s question comes from Becca, a sales rep: I read before that the wage base for 2008 was $102,000. I made over $90,000 at my first job and have earned more than $30,000 at my new job. Why didn’t my FICA tax deduction stop? Answer: The wage base generally must be applied on an employer-by employer basis. Regardless of how much you’ve earned at previous jobs, most employers must withhold the maximum tax again. There are some exceptions, including successor employers and common paymasters, but the general rule is you must reach the maximum again at your second job to stop the withholding. Even though the employer must pay the full tax and withhold it from the employee, amounts withheld above the maximum can be claimed as a credit on Form 1040. For tax year 2008, enter any excess FICA tax withheld by two or more employers on line 65 of Form 1040 and reduce your balance due or increase your overpayment by the amount of the excess. Contact Vision Payroll if you have any questions on the Social Security wage base.

November 21, 2008

Question of the Week: Why Did My FICA Tax Deduction Stop?

This week’s question comes from Matt, a sales rep: Every week there’s a deduction for FICA on my paycheck. Two weeks ago, the deduction was lower than usual and last week there was no deduction at all. Why did my FICA tax deduction stop? Answer: The FICA (Federal Insurance Contributions Act) tax is related to Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) program, commonly called Social Security. Under this program, there is a cap on benefits based on a maximum earnings level, called the wage base. For 2008, the wage base is $102,000 and for 2009 it is scheduled to increase to $106,800. At retirement, using current law, benefit calculations are limited to earnings at or below the wage base. Therefore, no tax is withheld on earnings above the wage base, effectively limiting the maximum withholding to $6,324 in 2008. Contact Vision Payroll if you have any questions on the Social Security wage base.

Contact Us Vision Payroll
Client Remote Access