Biden tax plan series
WHAT is the Social Security tax?
Social Security tax is levied on both employers and employees to fund the Social Security program. It’s collected through payroll taxes mandated by the Federal Insurance Contributions Act (FICA) or a self-employment tax mandated by the Self-Employed Contributions Act (SECA).
The Social Security tax pays for the retirement, disability, and survivorship benefits that millions of Americans receive each year under the Old-Age, Survivors, and Disability Insurance (OASDI) Program. In summary:
Social Security taxes fund the retirement, disability, and survivorship benefits that millions of Americans receive each year from the Social Security Administration.
In 2021, the Social Security tax rate is 12.4%, divided evenly between employers and employees, on a maximum wage base of $142,800.
Self-employed individuals pay the employer and employee portions of Social Security tax, but only on 92.35% of net business earnings.
Current tax law
Social Security (FICA) taxes have two parts: Old Age, Survivors, and Disability Insurance (OASDI) tax at 6.2% and Hospital Insurance Tax at 1.45%.
Both the employee and employer pay these amounts with self-employed individuals responsible for both the employee and employer portion.
Proposed tax changes
Biden proposes to apply an additional 12.4% OASDI tax for income levels above $400,000
This would be shared by the employee and the employer.
* * *
Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation.
* * *
He retired after 50 years of defending taxpayers audited by the IRS, EDD, BOE and other governmental agencies. He published a book on “How to Avoid or Survive IRS Audits” that’s available at Amazon. Readers may email tax questions to [email protected].
