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Social Security Taxes: The Basics Heading into 2017


As a business owner, you're responsible for withholding certain federal taxes from your employees' wages. These include FICA taxes, or Federal Insurance Contributions Act taxes. Those that fall under FICA include Social Security and Medicare taxes.

Social Security taxes include two parts: a portion that your employees pay, and a portion that your business pays. You're responsible for withholding 6.2 percent of your employees' gross wages from their check to pay into the Social Security fund, but you are also responsible for paying an additional 6.2 percent (the same amount) into the fund.

There's a cap on the wage amount for Social Security taxes, so that once an employee's wages exceed the capped amount, you're no longer obligated to pay the tax. In 2016, that amount was $118,500, but for 2017 you have to earn $127,200 to meet the maximum taxable earnings. There are other changes as well for the new year, so make it a New Year's Resolution to check with a qualified professional.

Social Security taxes are paid through the Social Security Administration's website and reported on Form W-2 at the end of the year.

Your Responsibilities

When it comes to Social Security payments, employers have several responsibilities. You must:

  • Report wages withheld for each employee on the W-2 form.
  • File Form W-3 (Transmittal of Wage and Tax Statements).
  • Confirm the accuracy of the employee's name and Social Security number. The information that you file on the W-2 form must match the employee's Social Security card exactly.

The good news is that all of these steps can be easily completed online. The Social Security Administration offers free filing of W-2 forms, free Social Security information verification and more.

Other Important Social Security Facts to Know

The Social Security Administration also offers additional services to employers on its website. Employers can use the SSA site to verify Social Security numbers as well as names for individuals. This is a valuable service for identifying potentially fraudulent identification, undocumented aliens posing as legal residents and other identification issues that could cause legal headaches for your business later on.

Keep Accurate Records

All of the money that you withhold for Social Security taxes must be paid to the fund eventually, so be sure to keep detailed records of all employee information, salary information, hours worked, and anything that impacts their wage history and employment. A simple record-keeping program or accounting program can help you maintain the detailed records that will make W-2 filings much easier for small to midsize businesses.

If you're confused about any of the requirements, give us a call. We're happy to discuss how Social Security rules apply to your particular business.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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