How to calculate fica

how to calculate fica

Things You'll Need

Instructions

Calculate your total earned income. Earned income includes income from wages, salaries, tips and self-employed business income. Do not include interest you receive, rental income, unemployment, Social Security or capital gains income.

Check the FICA tax rates on the Social Security website. As of 2012, the rate is 6.2 percent for the Social Security portion and 1.45 percent for the Medicare portion.

Determine whether your earned income exceeds the annual limit for the Social Security tax by contacting the Social Security Administration. For 2012, the Social Security tax applies only to the first $110,100 of earned income.

Multiply the the annual limit for Social Security taxes or your earned income, whichever is

less by 6.2 percent (.062) to determine how much will be withheld for Social Security taxes. For example, if you have $65,000 in earned income, you will have $4,030 withheld for Social Security.

Multiply your earned income by 1.45 percent (.0145) to calculate the amount of money that will be withheld for Medicare taxes. Unlike the Social Security tax, there is no cap on the income subject to the Medicare portion of FICA taxes. For example, if you have $65,000 in earned income, you will have $942.50 withheld for Medicare.

Add the two dollar amounts to determine your total FICA taxes. In the example we've been using, you would add $4,030 and $942.50, for a total of $4,972.50.

Source: ehow.com

Category: Insurance

Similar articles: