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Social Security Tax Law
Many individuals that are paying or should be paying Social Security tax are often unknowledgeable about Social Security tax laws. Uncertainties of what Social Security tax is or what is subject to Social Security tax often leads to questions like the ones answered below by the Experts.
What is Social Security tax?
The Social Security tax is a payroll tax that benefits old-age, survivors, and disability insurance (OASDI). The Social Security tax is one of the components that make up the FICA tax. The percentage for the Social Security tax is 12.4% of taxable wages. Half of this amount is paid by the employer and the other half is paid by the employee. If an individual is self-employed then they will be subject to the full Social Security tax percentage.
Is there a time/age when someone would not have to pay tax on Social Security benefits even if they continue working?
When individuals begin to receive Social Security (SS) benefits they are only allowed to have a predetermined amount of other income before SS benefits become taxable. Individuals that do go over this limit are only subject up to 85% of the SS benefits to become taxable and only subject to the income tax. It is not subject to Social Security and Medicare tax. There is no age or time that this taxation stops even if a person still makes more than the allotted income amount. If however the individual would fall below the allowed income level then SS benefit will not be subject to income tax.
If an employer did not withhold any Social Security tax during the ten years of part time employment but withholds SS tax when a fulltime employee, who has to reimburse the Social Security?
Your employer is required to collect Social Security and Medicare taxes unless you were exempt from these taxes. Often times the Social Security Administration routinely verifies W-2 information from the IRS with the information that they have on file. This is considered a compliance check for employers. Employers are also required to pay these taxes based on the wages of their employees. If your employer did make a mistake and you were not exempt from these taxes, then they can correct the mistake by filing an amended W-2 for every year that it was wrong and are obligated to also send this to the SSA. Social Security would be reimbursed by the payment being due. Often fines and penalties are also added on.
If a construction company (1120-S) pays its owner a bonus at the end of each yearly quarter and does not withhold any taxes not even Social Security tax. Is a bonus exempt from the Social Security Tax?
Typically a bonus is a part of income that should run its course through payroll and taxed. However if this bonus is payment to the owner as a distribution of profit and not as a compensation for services then it is not ran through payroll. Instead the payment (bonus) is recorded as distribution and would not be subject to the Social Security tax.
Does an individual have to pay the social security tax on Supplemental Executive Retirement Plan (SERP) payments?
Supplemental Executive Retirement Plans (SERP) is an agreement between a company and the employee that stipulates an amount they will provide for the employee at retirement, death, become disabled or the employee is terminated. If the benefit payment is made after the employee is terminated then the payment is not subject to FICA taxes. A FICA tax has two components: Social Security tax and Medicare tax. If however the SERP payment is supplemental to wages then it is considered a wage and will be subject to Social Security and Medicare tax via FICA taxes.
Gathering good information and having a clear understanding on Social Security tax laws often helps when faced with circumstances that involve Social Security tax questions. Experts can help answer what the Social Security tax is or what portion of your income is subject to the Social Security tax. Get the answers fast and often more affordably by asking an Expert.
Recent Social Security Tax Questions
This fall, I will be starting a PhD program and will be receiving
This fall, I will be starting a PhD program and will be receiving a stipend from the university. The funds I will receive from August 2015 through May 2016 total $19,734.50.
In my first year, my funds will come from two different sources - a teaching assistantship, which will already have tax money withheld from it, and a fellowship, which "is taxable but no withholdings are deducted from your paycheck." These fellowship dollars will total $11,000 in the 2015-16 school year. The taxed teaching assistantship money will be distributed through paychecks, while the pre-tax fellowship money will be provided in two lump sums (half in the fall of 2015, half in the spring of 2016).
I'm writing for your advice about how much money I should withhold from my paychecks in order to accommodate the $11,000 of fellowship money, so that I can avoid any surprises in tax season. The university recommended I consult a tax professional for guidance.
I will be paid in 22 installments from 8/28/2015 through 6/17/2016. Can you recommend a withholding amount to specify on my W-4?
Also, I currently work at another job, where my salary is $75,000, but I will be leaving that job on August 7th. I have had this job for three years. I'm wondering if this income puts me in a higher tax bracket than I would be otherwise, and how this would affect the withholding amount for my fellowship money. If this is the case, would I then need to adjust my withholding amount first thing in January 2016, since I will have a much reduced AGI in 2016 than I will have had in 2015?
My wife just started a job in 2014 and gets a 1099, she has
My wife just started a job in 2014 and gets a 1099, she has no expenses and we paid our taxes jointly, but I paid nothing towards her FICA or Social Security, how do I go about doing that?
I live in California and have spent most of my working life
I live in California and have spent most of my working life self employed. Recently I started a commission-only job and am shocked at how much is taken out in taxes etc despite the number of dependents I'm claiming. I'm trying to compare how much I'd pay if I go back to being self employed in the same line of work. What makes it tricky is that if, for example someone is commission-only who gets paid every two weeks they are taxed as if that bi-weekly income is what they earn EVERY two weeks for the entire year. If you'd like to answer a question on this topic please answer this question and I'll respond with the question. Thank you.
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