What is Social Security Tax?
The Federal Insurance Contributions Act (FICA) mandates that all employers withhold two taxes, including the Social Security tax. The Medicare Tax is the other.
Most employees, companies, and self-employed individuals are required to pay the Social Security tax, which is a portion of gross pay, in order to support the government program. The social security tax is waived for several taxpayer categories. Employers are responsible for deducting the appropriate amount of Social Security tax from each employee’s paycheck stubs and sending it to the federal government on time. There may be severe repercussions for doing otherwise.
How Social Security Tax is Calculated?
The annual Social Security tax rates are set by legislation and are imposed on both employers and employees.
Employers and employees pay a combined 12.4% Social Security tax or 6.2% of employee compensation. Self-employed people are responsible for the full 12.4%.
Medicare is denoted as Fed Med/EE on your pay statement, while Social Security taxes are referred to as OASDI.
Medicare tax and Social Security are federal programs that offer benefits to seniors, those with disabilities, and the offspring of workers who have passed away.
What is Social Security Tax Used For?
- 85 cents are allocated to a trust fund that provides retirees’ and their families’ monthly benefits. This equates to an annual benefit of $17,168.76 or an average monthly benefit of $1,430.73.
- Benefits for disabled people cost 15 cents. In 2021, monthly Social Security Disability Insurance benefits will typically range from $800 to $1,800. The most you could get each month was $3,000, though. Your monthly payment will be determined by the SSA using your lifetime average earnings prior to becoming disabled. Your monthly SSDI could be decreased if you get other government benefits (worker’s compensation, public disability benefits, etc.).
- The Social Security Administration is one of the most effectively run departments of the Federal Government.
Also, See: Social Security Administration (SSA)