Social Security: How are your FICA taxes collected?

By Michelle Shvarts
Principal Attorney

Disappointment and happiness rarely come together, but most of the U.S. employees face this kind of  emotion at least once in their lives. This is when you receive your paychecks only to see a deduced net amount from all kinds of federal taxes. These taxes include the social security and Medicare taxes.

Although listed separately in the details on your paycheck, the taxes collected through social security tax and Medicare taxes go to the same funding. Also called payroll taxes jointly and less commonly known as the FICA taxes, these taxes are the driving force behind all your social security benefits.

The U.S. government has made it mandatory upon everyone to pay these taxes if they earn an income under the substantial gainful activity, SGA. For self-employed people the taxes are collected under a separate program also under the federal rule, the Self-employed Contribution Act Tax, SECA.

How are FICA taxes collected?

For people working under employers, the employers would automatically collect these taxes from your paycheck before paying you the net amount. Most of the social security and Medicare taxes make up almost 7.5% of their total salary amount, also known as FICA taxes. The funds first go to the Internal Revenue Service, IRS before being transferred to the Social Security Funds.

On the other hand, people who are self-employed, owning businesses or not working under a social security tax paying employer, must pay and report the taxes to the Internal Revenue Service, IRS themselves.

How much taxes you owe to FICA?

FICA taxes are mandatory for every employed individual as mentioned above. The rates are set annually but may not necessarily change each year. The tax rates remained stable between 2013 to 2019 with the rates as follows:

  • 2% of the employees paycheck goes to Social Security;
  • 45% of the employees paycheck goes to Medicare;
  • Employers contribute a total of 12.4% of a professional’s earnings containing the 6.2% of the Social Security taxes within;

Hence, FICA taxes represent a 7.5% of the payroll earnings with an income base limit as $132,900 annually, as of 2019.  Any income above that amount will not be subject to taxes. Also, Medicare taxes do not have any income limits. Hence, all income amounts will be subject to Medicare taxes with marginal rates matching the income. The Medicare tax rates vary between 1.45% (minimum) to a 2.9% (maximum).

There is also a Medicare surcharge tax which must be paid directly by the employee instead of the employer. Any individual earning above $200,000 annually must pay an additional 0.9% of the extra income to the Medicare taxes as surcharge tax.

Let’s face this: Nobody is thrilled to have such huge cuts made through their payrolls. But this is the only engine that drives your social security benefits when you need them. Also, if you or your employer fail to pay these taxes you may not qualify for the social security claims in the first place.

For more information on FICA taxes and social security, you may contact a social security attorney.

About the Author
Ms. Shvarts is the managing attorney for Disability Advocates Group. She opened Disability Advocates Group to assist individuals who became disabled and unable to work to obtain the benefits they need and deserve.  Ms. Shvarts and the rest of the team at Disability Advocates Group are dedicated to assisting individuals obtain Social Security Disability Benefits (SSDI) and Supplemental Security Income (SSI) benefits.