Before you test the FICA tax calculator on this page, it is better for you to understand properly “what is a FICA tax ?”. The FICA meaning is Federal Insurance Contribution Act. Under this law, before making wage payments to a person, every employer will first ensure a specific amount of withholding from his/her wages as a contribution to social security funds.
Not only will the amount be withheld from an employee, but the employer will also contribute an equal amount to the social fund for the employee’s social security benefits and Medicare health insurance. Since the law requires the employer to withhold FICA taxes from the salary/wages of employees, It is considered social security withholding tax. Are FICA taxes Social Security Tax? Yes, because the FICA tax has two parts. The first part is 6.2% of employees’ taxable gross wages is the Social Security tax part.
FICA tax Calculator 2022 & 2023
What are FICA tax rates for 2022 & 2023?
The FICA tax rate for 2022 is the same as for the year 2021. In other words, for both 2022 & 2021, the FICA tax rate is 15.30%, split equally between the employer and employee. So Employer deducts the FICA tax of 7.65%. (6.2% for Social Security and 1.45% for Medicare) from wages of an employee and deposits, the combined contribution (its own 7.65%) totalling 15.3%.
What is the 2023 wage limit for FICA tax?
The federal government increased the limit for Social Security tax to $160,200 (up from $147,000 in 2022). The maximum amount of Social Security tax an employee will have withheld from their paycheck in 2023 will be $9,932 ($147,000 x 6.2%) and $9,114 ($147,000 x 6.2%) in year 2022.
How to calculate FICA tax?
Calculating FICA taxes contribution for an employee is easy. The aforesaid FICA tax calculator is based on the simple formula of multiplying the gross pay by the Social Security and Medicare tax rates. For example,
- The taxable wages of Mr Richard is $900 for the week
- Employer will deduct social security contribution would be $900.00 x 6.2% = $55.80.
- Further, the deduction for Medicare contribution would be $900.00 x 1.45%= $13.05.
- So, the total deduction from Mr Richard’s wages would be $55.80+$13.05= $66.85.
- The employer would also have to pay equally, i.e. $66.85 of FICA tax.
Who needs to pay additional Medicare tax?
The IRS, under the Affordable Care Act, introduced an Additional Medicare Tax in 2013. This additional Medicare tax is applicable only if the combined earnings from Medicare wages and self-employment income exceeds the threshold given below :
The threshold for additional medicare -2022 & 2023
|Head of household||200000||200000|
|Married filing jointly||250000||250000|
|Married filing separate||125000||125000|
However, the law for withholding additional medicare tax by an employer applies the moment your wages cross $200,000. It means that even if your earnings as per your filing status do not cross the threshold if your wages with an employer crosses $200,000, additional medicare tax must be withheld @ 0.9%.
Who Needs to File Form 8959 for Additional Medicare Tax ?
If you are subject to additional medicare tax withholding, you must file Form 8959. In other words, if the employee is getting wages plus tips is more than $200,000 (Refer to your W-2 form). Form 8959 informs IRS about the amount of Additional Medicare Tax you owe and if any amount of Additional Medicare Tax is withheld by the employer for you.
You must also file Form 8959 if your total Medicare wages and tips plus your self-employment income, if any are greater than the threshold amount as per your filing status [refer to the table above]. You can read IRS instructions on form 8959
Is FICA Taxes Paid by Self Employed Persons?
When you’re self-employed, you need to pay both employee and employer taxes. The term used is self-employment tax. In other words, a self-employed person has to pay 12.4% for Social Security Tax and 2.9% for Medicare Tax. And if you’re a high wage earner, you’ll still have to pay the 0.9% Additional Medicare Tax above your earnings threshold. Please read more on a self-employment tax calculator with faqs .
How to calculate the Additional Medicare Tax if you get medicare wages as well as earn freelancing income?
The aforesaid FICA tax calculator is only for medicare wage earners. However, there may be cases when a person who is working somewhere as an employee also carries on his own freelancing or some business. In that case, the FICA tax computation may be slightly different. Follow the steps to compute additional medicare tax on your income.
- Calculate 0.9% of the Additional Medicare Tax only if the wages you earned are in excess of the applicable threshold for the taxpayer’s filing status.
- Deduct the applicable threshold for the filing status from the total amount of Medicare wages received. If the net result is negative, consider it zero.
- Calculating the Additional Medicare Tax on any self-employment income in excess of the reduced threshold.
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