The FICA tax for 2009 consists of the Social Security tax of 6.20% on the first $106,800 of an employee's taxable earnings (wages, salary, cash bonus, etc.) plus the Medicare tax of 1.45% on every dollar of an employee's 2009 taxable earnings. In other words, there is no employee earnings limit on the Medicare tax.
The FICA tax of 7.65% (6.20% + 1.45%) on the first $106,800 of an employee's earnings is withheld from an employee's pay and is also matched by the employer. Therefore, the total amount to be remitted by the employer is 15.3% of each employee's first $106,800 of earnings in 2009 plus the Medicare tax of 2.90% of the employee's earnings above $106,800.
To illustrate the FICA tax, let's assume that a company has only one employee. During the year 2009 the employee has wages of $50,000. The FICA tax withheld from the employee will be the Social Security tax of 6.20% + the Medicare tax of 1.45% for a total of 7.65% x $50,000 = $3,825. The employer must match the $3,825 and remit a total of $7,650 for this employee. The employer's matching of $3,825 will be recorded as a payroll expense or as part of the company's fringe benefit expense.
Now let's assume that another company has only one employee whose salary in 2009 is $120,000. The FICA tax withheld from this employee will consist of the Social Security tax of $6,621.60 (6.20% x $106,800) plus the Medicare tax of $1,740 (1.45% X $120,000) for a total of $8,361.60. The calculation could also be computed as: ($106,800 x 7.65% = $8,170.20) plus ($120,000 - $106,800 = $13,200 x 1.45% = $191.40) resulting in the same total of $8,361.60. The employer is required to match the $8,361.60 and must remit $16,723.20. The employer's matching of $8,361.60 becomes an additional payroll related expense for the company.
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