Social Security Tax refers to tax which is paid by the employees, employers, and self-employed. This is a tax that fills only those who do some business or employment. Its special thing is that tax is equal for everyone, no less for anyone, no matter how much he earns. In all over words, everyone pays an equal rate. So this tax is also necessary as more taxes are paid. The rate of this tax is already fixed like 12.4%, so out of this, 6.2% paid by employees and the remaining paid by employers. Employers should also provide a separate social fund so that they can pay social security tax.
Is Medicare tax included in this tax?
No Medicare tax is included in this tax because it is different from this tax as it is a payroll tax. The most important thing is that both are part of FICA. So social tax is calculated on the rate of 12.4% and Medicare tax is calculated on the rate of 2.9% on net income. There is one big advantage if you are self-employed, you don’t need to pay income tax on your net income if you paid self-employment tax. You can claim this.
Both taxes are different but combined in 15.3% but calculated and charged for different purposes like social security tax charge for wages purpose. You can combine it with medicare tax after when the employee’s wages pay the wage base.
Who is used by social security tax?
It is used to provide help socially such as widows, orphans, retired persons, physically disabled people and others who are poor and live in villages etc. All this tax is directly received by the federal government and used in these social services.
Usually, income tax is paid by the people and directly deposited into the general fund but this tax is little different because this tax is added to social funds to help the needy people and some social works like road construction, hospital construction, bridges construction and so on. This tax is deposited for future investment.
Way to calculate social tax
Social security tax: Employee’s wages * social security tax rate
Basically, it is paid in a year. The more tax employees pay, the more employees expect social security fund, services from employers. Paying social tax is a very good thing and job, it is also a pleasure to make a note.
It totally depends on your income, the more your income, the more you gain benefits such as employment fund, promotion, bonus etc so you can pay as much social tax as possible.
About Form 941
Every employer has to fill the form 941 and have to give a report of FICA taxes( Medicare, social security tax), and income tax on a quarterly basis. After that, you will get notification by IRS, if you have qualified this form. So this tax must be paid by every employee or employer whether low or high income earner.