I am hoping that after reading this you say to yourself “Yep we are good.” If not then now you have an opportunity to make corrections.
On October 30, 2013, the Social Security Administration (SSA) told us that the maximum amount of earnings subject to the Social Security payroll tax was going to increase to $117,000 from $113,700, as of January 1, 2014. This had an impact on about 10 million workers who now have to pay an additional $3,300 in 2014. So the first thing every company should have done on January 1st was to have adjusted their payroll systems to make sure proper deductions are being taken.
This is still the same rate that Social Security has always been of 6.2%, but on $117,000 this means the maximum amount to be withheld has risen to $7,254 per year.
The second thing that every employer had to do, at least those with employees making more than $117,000 per year was to NOTIFY each affected employee that they were going to be paying more FICA as a result of the increase. The Medicare portion of FICA is 2.9% for every employee, of which 1.45% is paid by the employer. For employees earning more than $200,000 that is not the end of it.
Additional Medicare Tax
Under the Affordable Care Act an additional .9% tax is applied to employees who meet the following threshold:
- $250,000 for married taxpayers who file jointly,
- $125,000 for married taxpayers who file separately, and
- $200,000 for single and all other taxpayers.
These wage thresholds are not inflation adjusted, and thus apply to more employees each year. As employees receive increases in their wages if they pass these thresholds they should be informed of this tax since it is the employer that has to withhold this money.
If you need additional help some of your answers may be answered in Questions and Answers for the Additional Medicare Tax.