Problems With Social Security Tax
The Social security tax (officially known as FICA) that is cut from an employee's paycheck is where that employee's Social Security retirement benefits will come from. When there is a problem with that tax, specifically with the amount that is (or is not) being withheld, it can affect one's income for the retirement years.
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History
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Social security has existed in some form or another since early times. The ancient Greeks' form of "social security" was measured by the amount of olive oil they had stockpiled at a particular time.
From there, it was a slow evolution to the system we know today. It continued with the rise of guilds, then friendly societies, which evolved into fraternal organizations, which brought about the beginnings of trade unions. Each of these organizations sought to provide some means of economic security for its members and workers.
England's "poor laws" were brought to America with the first settlers, and later became the "agrarian justice" laws.
Next to come were the Civil War pensions, which were actually considered the first Social Security program of America. However, this and other similar programs did not extend to all workers, as it was not required that employers provide or allow contributions to such a system.
The Great Depression and the many changes that were brought about by President Franklin Roosevelt finally led to the passage of the Social Security Act, which was signed into law on August 14, 1935. From that, the Social Security Tax was implemented.
Significance
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Understanding how the Social Security Tax works will allow an individual to better track current earnings, thus having a fairly accurate record of how much one's Social Security pension should be. For this reason, it is very important that an employee make sure that his FICA deduction is correct.
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Effects of Incorrect Deduction
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If too little Social Security tax is cut, this can affect the amount of Social Security pension that you will receive upon retirement. The Social Security website, however, has the Tax Rate table posted. It is very easy to read, and extremely self-explanatory.
It is especially important that steps be taken to correct any discrepancies in the amount of Social Security tax is being deducted and the amount that should be deducted, as the pension amount will be partly based upon the deductions taken during the last few years of employment before retirement.
The problem of having too much tax cut is probably not going to occur; however, should you see that this has indeed occurred, then that, too, should be corrected.
Discrepancies should be reported to the person responsible for maintaining the payroll records at your place of employment. That person will (or should) have any necessary forms that may be required to correct the discrepancy.
If, for some reason, Social Security tax is not being deducted, and the employee is aware that it should be, she should report this directly to the Social Security Administration.
Self-employed persons should remember that they are responsible for paying their own Social Security taxes.
Benefits
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The correct deduction amount will ensure that the employee receives the exact amount of Social Security pension that is due him.
Prevention/Solution
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Employees should check their earnings statement each time it arrives and report discrepancies immediately. This will ensure that all problems have been resolved before retirement.
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