Social Security Tax Information

Social Security tax is collected from basically everybody who earns money in the United States. The money is used to fund the federal Social Security program, which provides retirement benefits to people older than 65 and provides disability benefits to disabled individuals of all ages.

Employee Withholdings

If you work for an employer, your employer is required by federal law to withhold a certain amount of each of your paychecks for Social Security tax.

Employer Contributions

Every employer must pay Social Security tax on each of its employees' earnings. That means that each paycheck you, the employee, are paying Social Security tax, and your employer is also paying an equal amount of Social Security tax.

Employee Tax Rates

As of 2009, the social security tax rate is 6.2 percent on all earnings up to $106,800 each year. That means if you earn $1,000 in a paycheck, you will pay $62 in Social Security tax and your employer will pay an additional $62.

Self-Employment

If you are self-employed, you must pay self-employment taxes in addition to regular income taxes. The self-employment tax essentially replaces the Social Security tax, and medicare tax, paid by an employee and employer.

Self-Employment Tax Rate

As of 2009, the self-employment tax rate is 15.3 percent of all income, which consists of 12.4 percent to cover Social Security tax, and 2.9 percent to cover medicare tax. Again, the 15.3 percent self-employment tax is in addition to income tax. Self-employed people must pay estimated quarterly tax payments to the IRS, which estimated payments include self-employment taxes and income taxes. So if you earn $10,000 in the first quarter, you must pay the IRS an estimated payment of $620 in self-employment taxes for that quarter, plus your estimated income taxes.

References

• Social Security Administration Website FAQ