Social Security acts as a valuable resource for individuals who have worked for at least a decade in a nongovermental job and are seeking financial assistance during their retirement. Social Security contributions, also called the Federal Insurance Contributions Act (FICA) tax, are a compulsory element of modern employment. Although you may vary the amount withheld from your monthly paycheck that is contributed to Social Security, you will be required to contribute funds from your paycheck on a regular basis.
Understanding your Social Security tax rate and the Social Security tax limits relative to your income can help you better understand how this particular process works. For joint returns, this process remains relatively straightforward. Just as there is a maximum income cap on Social Security taxes for single returns, there is also a cap on joint returns.
Identifying Your Social Security Contribution
You can identify your current Social Security contribution by examining your employer pay stub. If you utilize direct deposit systems for your income, your employer will have thorough receipts detailing your gross income and the various deductions, including Social Security, incorporated. As a general rule, the amount listed on your pay stub for Social Security deductions should equal 6.2 percent of your monthly earnings.
Looking For Your FICA Cap
According to the Internal Revenue Service (IRS), the maximum income level that will be subjected to Social Security taxes for a single contributor is $128,400. Any income earned above this level will be exempted from Social Security taxes. If you are married and are creating a joint return with your spouse, the maximum income cap rises proportionally to $256,800. Generally speaking, every employed worker, no matter their filing status, will be responsible to pay 6.2 percent of their gross monthly earnings to Social Security until their income exceeds $128,400.
Reporting Your 2018 FICA Contributions
Given the fact that your paycheck already had Social Security tax withheld, it is unlikely that a full-time employed individual will have to engage in any additional reporting on IRS Form 1040 related to these withholdings. However, if you have engaged in any activity which has led to additional income outside of your full-time employment, you will be required to report these earnings on your tax return and will likely have to pay the standard Social Security tax rate on them.
Changes to FICA Income Cap 2017
Taxpayers should note that the maximum income cap for earnings has changed slightly over the past year, rising from $127,200 to $128,400. For those who may still be unsure how to proceed with your tax filing, or would like to learn more about your payroll tax obligations, it is highly recommend that you consult with a CPA to ensure that you are making the appropriate tax payments.
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