Social security taxes and its types

Social security taxes and its types


Social Security Taxes are incredibly complicate. In the United States, it is administer by the Social Security Administration and is responsible for collecting taxes on the income earn by each of its beneficiaries. Each beneficiary may be married, unmarried, widowed, divorced, or have a partner of their own.

They are a federal tax that the employer pays by deducting them from the employee’s paychecks. They are usually paid on a quarterly basis. However, in some circumstances, the employer will pay this tax for the current year, too. This can happen when:

  • The employee is working for a foreign government
  • Employee is an executive who reports to a foreign government, or
  • The employee works for a foreign head of state.

Types of social security taxes

US workers and their employers pay Social Security taxes to fund the Old-Age, Survivors, and Disability Insurance (OASDI) program. The program, which also includes various welfare initiatives, assists retirees, the unemployed, and children of deceased workers, and people who receive help from Medicare, Medicaid, welfare, and the State Children’s Health Insurance Program. Commonly known as Social Security taxes, the taxes for these programs also require a separate Medicare tax, which is include in the total withholding establish by the Federal Insurance Contributions Act (FICA). Regularly employed people will pay half of their Social Security taxes while their employers pay the other half, but self-employed people pay the full tax since they are both the employees and the employers.

Social Security and Medicare are the two main types of Social Security taxes. These two taxes are generally withheld from an employee’s paycheck together, but are considered distinct and separate parts. For 2010, the total Social Security tax was 12.4% of total income. While the Medicare tax was 2.9% of total income. Workers were responsible for 6.2% of Social Security income and 1.45% of Medicare income. While their employers paid the remaining half for each tax.

Tax Relief Act

The Tax Relief Act of 2010 cause the Social Security tax to be reduce by 2% for the year 2011. But the Medicare tax remained the same. Workers in 2011 are responsible for 4.2% of Social Security tax income, while employers are responsible for 6.2%. The Medicare tax is still 1.45% for each part.

Self-employed people must pay both parts of Social Security taxes, since they assume the function of the employee and the employer simultaneously. However, the Tax Relief Act still applies, so self-employed individuals pay a total of 10.4% of their income in Social Security tax and 2.9% of their income in Medicare tax for 2011. In 2010, self-employed workers paid a total of 15.3% combined Medicare and Social Security taxes.

However, there’s very little you can do to avoid Medicare taxes if you’re self-employ. If you’re self-employ, you are require by law to pay Medicare taxes on your profits. For example you aren’t self-employ and don’t have a business. Then you’re only subject to it, or payroll taxes, on your wages. If you’re self-employ, you must file your annual U.S. federal income tax return with Social Security quarterly starting with your April 15th tax return.

They are separate from standard income taxes. The rate at which an individual is tax for federal income tax varies by income level. But all workers pay the same percentage for it. Also, for 2010 and 2011, the maximum income available for taxes for Social Security and Medicare is $106,800 United States Dollars (USD). Unlike regular income tax, individuals will not be tax by these programs on additional money earn after reaching the tax limit.



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