All employers are required to withhold Social Security tax from employees’ paychecks, unless an exemption applies. If you receive a paycheck stub each payday, your employer might include your Social Security tax deduction on the pay stub. The appearance of the withholding on your check stub depends on varying factors.
Identification
On Aug. 14, 1935, President Franklin D. Roosevelt signed the Social Security Act. The act was originally called the Economic Security Act; when Congress reviewed the bill they changed the title. The first Social Security taxes were collected in January 1937. Political figures are not exempt from Social Security tax. The President, all Congressional members, the majority of political appointees and federal judges have been paying Social Security tax since 1984. Social Security provides benefits to retirees and their dependents, and the disabled and their dependents.
Appearance
If your state requires your employer to give employees a paycheck stub, it may also list the information that should be included on the stub. In many cases, the employer must list each of the employee’s deductions for the payroll period. Social Security tax is collected under the authorization of the Federal Insurance Contributions Act. The official name for Social Security is the Old-Age, Survivors, and Disability Insurance. Consequently, Social Security tax can show on your paycheck stub as FICA or OASDI. Abbreviations vary by employers; some simply show the withholding as SS. The current deduction amount is shown beside the abbreviation.
Year-to-date Data
Many employers include the employee’s year-to-date deductions on the paycheck stub. In this case, your Social Security tax withholding thus far for the year will show as a separate line item under the year-to-date column. Your final year-to-date data should mirror your W-2.
Calculation
Your employer withholds Social Security tax from your paychecks at 4.2 percent for tax year 2011 of your gross income, up to the yearly wage limit of $106,800. Once you have met the annual wage base, it stops the withholding and resumes it at the start of the next year. If you have pretax voluntary deductions, such as a traditional 401k plan or a Section 125 medical plan, your employer deducts the benefit from your gross wages before withholding Social Security tax.
Considerations
Only in rare cases does an exemption to Social Security tax exist, such as employees who work for a university or college at which they are also a student. Your employer pays 6.2 percent of gross wages for Social Security taxes, up to $106,800 for the year. Self-employed individuals pay 10.4 percent since they do not have an employer to pick up the remaining amount. Medicare – which provides hospital insurance to qualified individuals upon reaching age 65 – makes up the other half of FICA. Unlike Social Security tax, Medicare does not have an annual wage limit.
References
- Social Security Administration: Frequently Asked Questions
- Social Security Administration: Social Security & Medicare Tax Rates
- IRS.gov: Understanding Taxes
- Social Security Administration. "Contribution And Benefit Base." Accessed Oct. 15, 2020.
- Social Security Administration. "How is Social Security financed?" Accessed June 15, 2020.
- Social Security Administration. "2021 Social Security Changes." Accessed Oct. 15, 2020.
- Social Security Administration. "Support." Accessed June 15, 2020.
- Social Security Administration. "Retirement Benefits," Page 3. Accessed March 28, 2020.
- Internal Revenue Service. "Topic No. 751 Social Security and Medicare Withholding Rates." Accessed March 28, 2020.
- Medicare.gov. "How is Medicare funded?" Accessed June 15, 2020.
- U.S. Department of the Treasury. "The CARES Act Works for All Americans." Accessed June 15, 2020.
- U.S. Congress. "S.3548 - CARES Act." Accessed June 15, 2020.
- Social Security Administration. "Social Security Benefit Amounts." Accessed June 15, 2020.
- Internal Revenue Service. "Publication 15 (2020), (Circular E), Employer's Tax Guide." Accessed June 15, 2020.
- Internal Revenue Service. "Topic No. 608 Excess Social Security and RRTA Tax Withheld." Accessed March 28, 2020.
- Social Security Administration. "Social Security & Medicare Tax Rates." Accessed March 28, 2020.
- Social Security Administration. "Social Security Legislative Bulletin Number: 111- 66." Accessed March 28, 2020.
- Social Security Administration. "1960s." Accessed March 28, 2020.
- Social Security Administration. "1950s." Accessed March 28, 2020.
- Social Security Administration. "1970s." Accessed March 28, 2020.
- Social Security Administration. "The Evolution of Social Security's Taxable Maximum." Accessed March 28, 2020.
Resources
Writer Bio
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.