Social Security/Medicare: What you need to know

What do employers need to consider regarding Social Security and Medicare? The Social Security program was created by the federal Social Security Act. It is a worker-employer-government insurance program, covering benefits for retirement, survivors, disability, and Medicare. Employers withhold two separate taxes from employees’ paychecks. One is the Social Security tax, and the other is the Medicare tax. Medicare, which is funded through taxes, provides health insurance for people age 65 or older and many people with disabilities. Medicare consists of Parts A (hospital insurance), B (medical insurance), and C (Medicare Advantage), which offer additional preventive health benefits and patient protections. In 2006, Medicare began offering prescription drug plans, known as Part D.
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The Social Security tax is also known as the Federal Insurance Contributions Act (FICA). Employers and employees contribute a certain percentage of an employee’s earnings (up to a “maximum taxable earnings” amount that is determined annually) during the year for Social Security and a certain percentage of all taxable earnings for Medicare. For example, in both 2015 and 2016, employers and employees contribute 6.2 percent of the first $118,500 an employee earns during the year for Social Security and 1.45 percent of all taxable earnings for Medicare. The particular percentages are determined annually, and the current rates can be located at http://www.ssa.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2016.html.
Medicare tax increase. Effective January 1, 2013, the Medicare tax rate on wages went up by 0.9 percent on earnings over $200,000 for individual taxpayers and $250,000 for married ...

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