How to Figure FICA Taxes

How to Figure FICA Taxes. The Federal Insurance Contributions Act (FICA) tax is a federally imposed payroll tax that is levied on both employers and employees. It is used to fund both Medicare and Social Security benefits. The taxes are split between you and your employer. However, if you are self-employed, you must pay the entire amount. In this case, it is called self-employment tax instead of FICA tax.

Calculate your FICA taxes to make sure the right amount is withheld.

Things Needed

  • Calculator

Step 1

Calculate your entire total taxable income for the tax period. Include all earnings that are work-related or other compensation received from employment. Some examples of taxable income are hourly or salaried compensation, commissions, and tips. Deduct any premiums that are non-taxable such as those for dental and health insurance.

Step 2

Access either ssa.gov or irs.gov to look up the current FICA tax rates. Enter “Tax rates” in the search bar in either website to bring up the results. For example, in 2010 the rate is 6.2 percent for Social Security tax and 1.45 percent for Medicare tax. If you are self-employed, the tax rate is 12.4 percent for Social Security and 2.9 percent for Medicare.

Step 3

Multiply your earned income or the annual limit for Social Security taxes by 6.2 percent. For example, if you earned $50,000 in taxable income, your Social Security tax liability is $3,100. According to the IRS, the maximum amount of wages subject to the Social Security tax for 2010 is $106,800” (See reference 3). Therefore, earned income above $106,800 cannot be taxed for that tax year.

Step 4

Calculate the amount of money to be withheld for Medicare. Multiply your taxable income by 1.45 percent. For example, if your taxable income is $50,000, then $725 will be withheld for Medicare. However, unlike the Social Security tax, there is no maximum cap on the income subject to Medicare.

Step 5

Add the two amounts to reveal your total FICA taxes. Therefore, the total amount of FICA taxes that should be withheld for an employee making $50,000 a year is $,3825.

Warnings

  • If you are self-employed, multiply your taxable income by 12.4 percent for Social Security and 2.9 percent for Medicare, respectively. Add the numbers together for the amount of self-employment tax withheld.

References

  • IRS: Medical Resident FICA Refund Claims: What are FICA Taxes?
  • IRS: Social Security Tax/Medicare Tax and Self Employment
  • IRS: Social Security and Medicare Taxes
  • Social Security Online: Social Security & Medicare Tax Rates