Monday, December 05, 2005

Social Security tax items

The government increases the maximum social security taxes that you can pay each year. The maximum wage base for 2005 is $90,000, an increase of $2,100 from the 2004 max of $87,900. At a rate of 6.2%, the total social security taxes that your employer will withhold from your salary increases from $5,449.80 in 2004 to $5,580.00 in 2005. In addition, every employee has Medicare taxes withheld from their pay at a rate of 1.45%. There is no limit on your wages subject to this tax.
If you work for more than one emloyer and Earn More Than $90,000 for 2005, each of your employers will withhold social security taxes from the first $90,000 that you earn from them. At a rate of 6.2%, this translates into total social security taxes of $5,580.00. There are situations when you might have more than the maximum withheld during the course of the year. Since employers are required to withhold social security taxes on the first $90,000 earned by each of their employees (this allows the government to keep the employer's matching contributions), if you work for more than one employer and earn more than $90,000 during 2005, you'll have excess social security taxes withheld. Make sure to take credit for these excess taxes on your 1040 as additional federal taxes paid in.