- You must pay Social Security taxes on any earned income, whether earned during the current work week or paid tardily because of back pay obligations levied on your employer for actions such as a negotiated employment contract or court-ordered proceeds from litigation. The deduction is mandatory. The Internal Revenue Service deducts Social Security taxes from your gross earned income under authority of the Internal Revenue Code, Sections 3101(a) and 3102(a). If your back pay exceeds the yearly taxable maximum, the entire amount may not incur Social Security tax deductions.
- Maximum taxable wages have increased along with the percentage of Social Security taxes. When the wage cap was established in 1937, the tax was eliminated when income surpassed $3,000. As of the date of publication, the wage cap stands at $106,800. Social Security figures the wage cap by using the national average wage index as the taxable maximum.
- Expect to pay $4,485.60 to Social Security's Old Age, Survivors and Disability Insurance (OASDI) program if your wages reach or exceed the maximum taxable under the law. Beginning in 1990, both employers and employees have paid 6.2 percent of gross wages to the OASDI program. That percentage changed for the 2011 tax year when Congress mandated a 2 percent decrease in the employee portion of the tax. Unless legislators extend the decrease or make it permanent, the tax will revert to the pre-2011 level of 6.2 percent.
- Social Security taxes paid are used to fund the people who now receive benefits. Any money not obligated to current recipients is deposited in the Social Security Trust Fund. Although some taxes qualify as deductible under the Internal Revenue Code for federal income tax return purposes, Social Security tax is not one of them. Check with your state taxing authority for regulations to state laws pertaining to deductible taxes.
Social Security Tax
Wage Cap
Tax Percentages
Considerations
SHARE
