Learn About FICA, Social Security, and Medicare Taxes

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Learn About FICA, Social Security, and Medicare Taxes

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Social Security and Medicare Taxes (FICA)

There is no cap on wages for the Medicare portion of FICA. The Medicare portion of FICA is 1.45% for wages up to 200,000 and 2.35% for wages above $200,000. TurboTax Live packages offer review with a tax expert. Download a blank one from the IRS website, fill it out and give it to your human resources or payroll team.

Is Social Security taxed after age 70?

Yes, Social Security is taxed federally after the age of 70. If you get a Social Security check, it will always be part of your taxable income, regardless of your age. There is some variation at the state level, though, so make sure to check the laws for the state where you live.

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How FICA taxes are calculated

Under the CARES Act, employers were allowed to defer their share of Social Security taxes owed for the year ending Dec. 31, 2020. Specifically, 50% of the deferred amount was due by Dec. 31, 2021.

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So the total tax rate for Social Security is 12.4%. Any income above $147,000 is not taxed for Social Security purposes. The Medicare rate of 1.45% is paid by wage earners on income currently up to $200,000. For income above that, they pay an additional Medicare tax of 0.9%. Employers match the 1.45% rate but are not responsible for matching the 0.9% rate.

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If you overpaid Social Security taxes and you only have one job, you’ll need to ask your employer for a refund. Excess Medicare tax repayments are nonrefundable since there’s no wage base limit. An Additional Medicare Tax can be deducted from some employees’ pay as well.

FICA Tax Rates and the Benefits They Fund

Social Security and Medicare benefits are funded by a payroll tax called the Federal Insurance Contribution Act , shared equally by employees and employers. FICA was initially created in 1935 to pay for Social Security benefits to retirees. It now covers not only retirement benefits, but also disability benefits Learn About FICA, Social Security, and Medicare Taxes and benefits to workers’ survivors. The Medicare tax was added in 1965, helping to pay for medical coverage primarily for those aged 65 and older. FICA taxes include deductions for social security and medicare benefits. Learn more about payroll taxes and how to calculate FICA taxes with Paychex.

What does FICA cover?

Employers must withhold FICA taxes from employees' wages, pay employer FICA taxes and report both the employee and employer shares to the IRS. For the 2019 tax year, FICA tax rates are 12.4% for social security, 2.9% for Medicare and a 0.9% Medicare surtax on highly paid employees.

For Medicare, roughly 38 percent of FICA tax went to this program. In the year 2014, The Hospital Insurance Trust received 87 percent of its revenue from FICA tax. As you can see from this information, without FICA tax, these programs would struggle substantially at best and cease to exist at worst. And if you are like anyone else, the idea of paying taxes is not a pleasant one.

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