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.

Friday, December 02, 2005

IRS details 2006 Mileage allowance

IRS Adjusts Mileage Rate to 44.5 Cents
The Internal Revenue Service on Friday set the deductible rate that workers can claim next year for using personal cars on business at 44.5 cents a mile.
That's less than a temporary rate that the tax agency put in place for the last four months of this year, reflecting higher prices at gas pumps nationwide. The temporary rate is 48.5 cents a mile.
Next year's rate is higher than the 40.5 cents a mile in effect for most of this year. Many businesses use the IRS rate as a benchmark for reimbursing employees for travel costs.