Everything You Need to Know About Social Security Tax
Social Security tax requires you to both withhold a percentage of your employees’ wages and make a matching contribution. If you have employees, you’re impacted by it. But it can often feel overwhelming.
Here’s all you need to know about Social Security tax.
The Social Security tax withholding rate is 6.2% That means for each paycheck, you’re required to withhold 6.2% of every employee’s wages, and contribute 6.2% of their wages as well.
Annual wage base changes
Yes, the Social Security wage base does change. In fact, it changes every year. As of 2020, the wage base is $137,700. That means that you’ll only withhold and match until an employee reaches this amount.
What it funds
Social Security taxes fund things like retirement, disability, and survivorship benefits for your employees.
If you’re self-employed, you’re required to pay a higher percentage in order to cover both the employer and employee contributions. The Social Security withholding rate for self-employed is currently 12.4%.
In 2020, the maximum Social Security contribution is $8,537.40. That means you’ll never withhold more than this amount from an employee, and you’ll never pay more than that per employee. If you do, you’re required to reimburse your employee(s) affected.
Have any additional questions about Social Security tax or anything else relating to payroll or HR? We’ve got you covered. We’re here to answer your questions and discover the best solutions for your unique business. We’d love to talk. Let’s get started here.