What Form 944 Pr Employment: What You Should Know
Contributions paid by Social Security are not subject to FICA. Employees who receive tips, remuneration from a trade or business, or self-employment income are considered paid in FICA when their employer withholds and reports the amount. Social Security benefits may be subject to FICA if certain thresholds are exceeded. FICA Basics: What is FICA? Employees who are paid in cash and receive no other wages are not subject to FICA taxes. What is the FICA tax rate? The tax rate is 6.2 % on cash wages up to 113,700 and 12.4 % on wages over 113,700. How is FICA computed? FICA taxes are computed by multiplying the employee's total wages (before deductions) by 1.45 or 0.906. The employee's gross base wages cannot exceed 113,700 (113,700 – 215,400 if married filing separately). If an employee is paid in cash, FICA taxes are computed by multiplying the employee's gross cash wages by the applicable 0.906 percent rate, and then adding that amount to the total wages. For example: 25,000 in cash wages = 2,400 1.45 percent (0.906) = 1,120 Total wages (1,360) multiplied by 1.45% = 1,624 (FICA on cash wages of 1,360) Total cash wages 5,760 = 5,240 with no deductions.