Social Security/Medicare laws & HR compliance analysis

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 aged 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 each pay a FICA tax comprising a Social Security tax of 6.2 percent on the employee’s earnings up to the wage base ($142,800 in 2021), plus a Medicare tax of 1.45 percent on all earnings. The maximum possible Social Security tax is $8,853.60 in 2021. The percentages are determined annually, and the latest rates can be located at
Additional Medicare Tax. There is an Additional Medicare Tax of 0.9 percent on earnings over $200,000 for individual taxpayers and $250,000 for married couples filing jointly; for married couples filing separately, the threshold amount is $125,000. There is also a 3.8 percent Medicare tax assessment on certain investment income for individuals earning over $200,000 and married couples who file jointly earning over $250,000.
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