The Social Security Administration (SSA) has announced that the 2016 Social Security taxable wage base is going to be $118,500 which is the same as 2015 and it will see no increase this year. Once an employee reaches this taxable wage threshold no further Social Security tax will be withheld.
FICA Tax Rates:
The 2016 tax rate for employees will remain at 7.65%. This is the combined rate for Social Security and Medicare. The Social Security portion is 6.2% on earnings up to the taxable wage base of $118,500 and the Medicare portion is 1.45% on all earnings. This means that the max Social Security tax for employees is going to be $7,347. Employers continue to pay a matching portion of 6.2% for Social Security and 1.45% on Medicare respectively.
Employees that have earned over $200,000 will also be required to pay an additional 0.9% Medicare surtax, increasing their FICA amount to 8.55%. The Medicare surtax is only imposed on employees not employers.
If you’re a client AdvaPay’s web-based payroll system will automatically adjust to account for the higher tax limit for the Social Security portion of FICA. If you use another payroll provider confirm your payroll system will be updated. In addition, employers should notify their employees about the increase in FICA tax ahead of time in an effort to reduce confusion.
Get More Information:
For more information from the Social Security Administration regarding these changes, click here.