How to Calculate FICA Taxes on a Paycheck
The Federal Insurance Contributions Act is a tax provision in the Internal Revenue Code authorizing the IRS to collect Social Security and Medicare taxes. Most employees, employers and self-employed individuals in the United States are required to pay FICA taxes. Employees pay FICA taxes through tax withholding -- their employer deducts it from their paychecks -- and self-employed people pay it directly to the IRS. The calculation for FICA taxes depends on the situation.
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Instructions
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Determine an hourly employee's regular gross income for the pay period by multiplying her regular hours worked by her regular pay rate. Regular hours are hours worked up to 40 for the week. If applicable, calculate overtime earnings for the pay period by multiplying the employee's overtime hours by her overtime pay rate. Under federal law, overtime hours are work hours that exceed 40 for the week. Pay overtime hours at 1 1/2 times the worker's regular pay rate. Add the employee's total regular earnings and overtime earnings to arrive at her total gross wages.
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Calculate a salaried employee's gross income for the pay period by dividing the annual salary by the number of pay periods in the year. For example, if he gets paid weekly and receives $50,000 annually, the calculation would be $50,000 divided by 52 weekly pay periods, which equals a weekly salary of $961.54.
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Withhold Social Security tax at 4.2 percent of the employee's gross income up to $106,800 for the year, and Medicare tax at 1.45 percent of all gross income, at the time of publication. For example, assume the employee receives $550 weekly. In this example the Social Security calculation would be $550 x .042 = $23.10 weekly, and the Medicare calculation would be $550 x .0145 = $7.98 weekly.
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Withhold FICA taxes for a household employee -- such as a babysitter or a caretaker -- who you pay cash wages of $1,700 or more to. Calculate Social Security tax at 4.2 percent of gross wages up to $106,800 for the year and Medicare tax at 1.45 percent of all gross wages.
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Calculate Social Security tax if you are self-employed -- such as an independent contractor -- at 10.4 percent of your gross income up to $106,800 for the year, and Medicare tax at 2.9 percent of all your gross income. At the time of publication, you must pay self-employment (FICA) taxes if your net earnings are more than $400 for the year.
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Tips & Warnings
Gross pay is income before deductions; net pay is income after deductions.
If you prefer to pay your household employee's portion of FICA taxes from your own funds, do not withhold Social Security and Medicare taxes from their paychecks.
At the time of publication, employers pay 6.2 percent for Social Security tax and 1.45 percent for Medicare tax.
The IRS allows self-employed individuals to deduct half of their Social Security and Medicare taxes when they prepare their federal income tax return.
Consult IRS Circular E for the appropriate tax year to determine FICA withholding percentages for employees.
See IRS Publication 926 for the appropriate tax year for FICA rates for household employees.
Visit the IRS website for FICA rates if you are self-employed.
References
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