How to Compute FICA Taxes

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FICA stands for Federal Insurance Contributions Act, also known as payroll taxes. The FICA tax includes two different taxes: the social security tax and the medicare tax. To compute your FICA taxes, you need to know whether you are treated as an employee, in which case you will split the FICA taxes with your employer, or as an independent contractor, in which case you will have to pay the entire amount yourself.

Determine your income from jobs where you are treated as an employee. If you are an employee, you will receive a W-2 at the end of the year. If you are an independent contractor, you will receive a 1099-MISC. If you have none, skip to step 3.

Compute how much FICA tax you owe from this income. If your total employee income does not exceed $106,800, multiply your total income by 0.0765. For example, if your total employee income was $100,000, you would have $7,650 taken out of your paycheck for FICA taxes. If your income exceeds $106,800, multiply your employee income by 0.0145 and add $6,621.60 to the total because the social security portion is only charged on the first $106,800 for 2010. For example, if you earned $150,000, you would have $8,796.60 taken out of your paycheck.

Determine your independent contractor income.

Multiply the money you earned as an independent contractor by 0.153 because you are responsible for paying the entire amount yourself. For example, if you earned $50,000 from independent contractor income, you would owe $7,650 in FICA taxes. If your independent contractor income exceeds $106,800, you would owe $13,243.2 plus 2.9 percent of your earnings.

Tips & Warnings

  • If your self-employment income plus your employment income exceeds $106,800, you only have to pay the social security portion of the FICA tax (12.4 percent) on the portion of your self-employment income needed to reach $106,800. For example, if you had $90,000 of employee income and $36,800 of self-employment income, you would pay the entire FICA tax, 15.3 percent, on the first $16,800, and only the medicare portion, 2.9 percent, on the remaining $20,000.

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