There are a number of important things that you’ll need to remember for your 2016 payroll accounting. Keeping these numbers in mind will make it easier to ensure that your payroll is done accurately.
What Is The 2016 Social Security Tax Rate For Employees?
The social security tax rate for employees in 2016 will be 6.2 percent of the first $118,500 they earn in salaries or wages. The Social Security tax will not be applied to earnings which exceed this amount, and both the earnings and percentage limit will remain the same as 2015.
The Social Security tax forms one part of the tax for FICA payroll. The other part is Medicare taxes, which is placed on each dollar a worker makes. This means that the Medicare tax doesn’t have a cap or earnings limit.
What Is The 2016 FICA Tax Rate for Self Employed Individuals?
The FICA tax rate for self-employed individuals in 2016 will be 15.3% for the first $118.500 of their net income, as well as 2.9 percent for net income which exceeds this amount. The FICA tax for self-employed individuals in 2016 is comprised of the Social Security tax at 12.4 percent on the first $118,500 of net income, along with a Medicare tax of 2.9 percent for each dollar of their net income. Taxpayers in a high income bracket might also be subject to Medicare surtaxes.
What Is The 2016 Social Security Tax Rate For Employers?
The 2016 Social Security tax rate for employers will be 6.2 percent of every employee’s initial $118,500 of earnings. Should an employee’s earnings exceed $118,500, all earnings after this amount won’t incur Social Security taxes. In other words, the total amount of an employer’s Social Security tax for every employee for 2016 is approximately $7,347. Along with the Social Security tax, there is also a 1.45 percent Medicare tax, and employers are expected to match the Medicare taxes of their employees.
What Are The Total Earnings Which Are Subject to Social Security Tax For 2016?
The total amount of a worker’s earnings which are subject to Social Security Tax in 2016 is approximately $118,500. This number is also known as the Social Security yearly limit or the maximum taxable earnings, and may be changed yearly dependent on the standard wage index for the country. However, there are no changes for 2016 so the amount will remain the same as the previous year.
This wages limit is important as it is utilized for the purpose of computing the Social Security tax for employees and thus the Social Security tax of the employer. Essentially, employers are required to match the Social Security tax of each employee. When this tax is combined with the Medicare tax the two are typically referred to as the FICA tax. At the same time, there is no yearly cap or limit for wages when calculating the Medicare tax for employees, employers and those who are self-employed. Understanding the various numbers and regulations above will make your 2016 payroll a lot easier.