[lbo-talk] question about national sales tax

Alan Jacobson alanjacobson at sbcglobal.net
Wed Aug 11 13:38:18 PDT 2004


Social security and Medicare taxes have different rates and only the social security tax has a wage base limit. The wage base limit is the maximum wage that is subject to the tax for the year. Determine the amount of withholding for social security and Medicare taxes by multiplying each payment by the employee tax rate. There are no withholding allowances for social security and Medicare taxes.

The employee tax rate for social security is 6.2% (amount withheld). The employer tax rate for social security is also 6.2% (12.4% total). The 2003 wage base limit was $87,000. For 2004, the wage base limit is $87,900.

The employee tax rate for Medicare is 1.45% (amount withheld). The employer tax rate for Medicare tax is also 1.45% (2.9% total). There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. ********* Not my prose, it's from IRS Publication 15. It is a straight calculation, if the amount taken out is different from 6.2% for FICA (up to the cap) + 1.45% for Medicare (no cap), there is an error.



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