Social security tax
Social Security Tax is also called as employment tax. Being either self-employed or employee need to pay the social security tax. The U.S. social security provides retirement benefits and medical insurance benefits to the individuals subject to certain eligibility requirements. Social Security Tax is part of FICA taxes. FICA means Federal Insurance Contributions Act. The Federal Insurance Contributions Act made up with Social Security taxes and Medical Taxes. The Social Security Act comes into force during 1935 with the imposition of tax rate of 2%. During 1950 it was 3%, 6% at 1960, 8.4% during 1970, 10.2% in 1980. From 1990 it is continued with 12.4%. For employees and employers, the social security tax is 6.2% and for self-employed, the social security tax is 12.4%. The social Security tax is collected for the Self-employed and Employers.
SOCIAL SECURITY TAX RATES
Taxes are collected on taxable earnings. Social Security Tax rates comprises and differs for employers and self employed persons. At present the rates of social security tax comprises with two trust funds such as Old Age and Survivors Insurance (OASI) Trust Fund and Disability Insurance (DI) Trust Fund.
SELF-EMPLOYED
Self-employed people must report their earning and they should pay the taxes with IRS. If net earning $400 or more in a taxable years, it should be reported through SE schedule. Self-employed persons should calculate their self-employment tax based on their net earned income. It should be reported in Form 1040. The self-employed persons should remit the self-employment tax with the federal income. Generally it is quarterly.
EMPLOYERS
Employers required withholding the social security tax and Medicare from employee?s wages. Such withhold amounts should be paid to the federal government with W-4 Form. The payment depends upon the size of employer?s payroll. The employers classified as monthly or semiweekly depositors depending upon the payroll. If the employer deposited less than $50,000 in taxes then the employer is monthly depositor. It means taxes must be remitted by the 15t following month through an authorized commercial bank. If the employer reported more than $50,000 in the previous year, the employer is treated as semiweekly basis. During the current year, the employer must deposit the taxes by the Wednesday after payday. If the payday falls on Wednesday, then Wednesday, Thursday or Friday.
However, if the employer accumulating less than $1,000 during the quarter may skip the deposits entire and send the full payment with their quarterly employment tax returns. Similarly if the employer has accumulated more than $100,000 of accumulated liability during a month or semiweekly period, the funds must be deposited by the first banking day after the $100,000 has reached.
The employer is required to file Form 941 each quarter. This return details the wages subject to tax for the quarter, amount o security tax, medicate tax and federal withholding collected each pay period. These returns should match with deposits of the tax. At the end of he year, the employer should be file W-2 with the federal government and the Social Security Administration.
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