The role of federal payroll tax by an employer is withholding from an employee’s wages and payments for social security and medical care taxes. However, the most important part of an organization is the payment of Federal Insurance Contributions Act (FICA).These are unique Payroll taxes in that there is an employer’s portion of the fee and also withholding from an employee’s wages that must be paid. There are three separate charges that FICA is supposed to withhold from the employee’s wages.
- Medical care tax of 1.45 percent
- 6.2 percent of social security tax
- Medical surtax of 0.9 percent if the employee has a wage of over $200,000.
The law also demands from an employer’s portion of the following two types of taxes:
- Regular medical care tax of 1.45 percent that is not applicable to high-earning employees.
- Social security tax of 6.2 percent.
Therefore, in total you pay four portions of taxes that add up to make 15.3 percent. That is 6.2 employer shares plus 6.2 employee’s part added to 1.45 medical care tax from both the employer and the worker. This is unlike FICA whereby there is an additional 0.9 percent tax on the employee wages, and there is no employer’s match for the same. Also, it only applies to employee’s who earns more than $200,000. Here is how to calculate employer’s portion, withholding amount and Medicare surtax withholding amount.
When you want to calculate withholding and employers amount, you multiply employees gross wage payment by the tax rate. In this case, the number of exemptions withholds and which an employee may have claimed does not affect the social security and regular medical care taxes.
In the case of medical care surtax, there might be a mismatch between the employers and employees amount. Companies argue that 0.9 percent must be paid if one is earning more than $200,000 while the employee’s perspective is that it should be based on combined wages and filing status. This creates under or over withholding issues.
If your goal is to ensure that you save the maximum amount, even after remitting Payroll taxes, at the end of your fiscal year, contact Robert A. Woloshen CPA, PC. They provide professional services with a personal to ensure quality services. In addition, they don’t concentrate on what you earn but what you keep.