by The MDTAXES Network | Nov 27, 2013 | Uncategorized
Each year, the government bumps up the maximum Social Security taxes that you can pay. For 2014, the maximum wage base jumps to $117,000, an increase of $3,300, or 2.8%, over the max of $113,700 that was in place for 2013.
The Social Security Administration predicts that 10 million individuals will end up paying higher taxes due to this increase, out of the estimated 165 million workers who will pay Social Security taxes next year.
At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $7,254. This is $205 higher than the 2013 max of $7,049.
Higher Medicare Taxes Due To The Affordable Care Act:
On June 28, 2012, the Supreme Court upheld most of the provisions of The Patient Protection and Affordable Care Act, including the increase to the Medicare taxes high-income taxpayers will pay starting in 2013.
Starting in 2013, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees’ Medicare taxes at a rate of 1.45%, which means the total Medicare tax will be 3.8% for high-income taxpayers.
For example, if you’re single, and earn $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k – $200k) * .9%) for 2013 and beyond.
To increase taxes for high-income individuals even more, the Medicare tax will also apply to unearned income for the first time since this tax was enacted. People over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income beginning in 2013. You will pay this tax in addition to any federal and state income taxes due on this income.
Calculating the Self-employment Tax:
If you’re self-employed and earn more than $400 in net profit from your business, you’re subject to social security and Medicare taxes as well. Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on page 2 of your Form 1040.
The self-employment tax is based on a social security tax rate of 12.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes. Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.
Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay in taxes. If you earn income as an employee and as an independent contractor, and your combined income exceeds $113,700 in 2013, make sure to complete Section B of the Schedule SE. Otherwise, your tax calculation will be incorrect and you’ll end up overpaying your self-employment taxes.
Do You Work For More Than One Employer in 2013 and Earn More Than $113,700?
For 2013, each of your employers withholds social security taxes from the first $113,700 that you earn from them. If you work for more than one employer and your total salary from all sources exceeds that threshold, you’ll have excess social security taxes withheld. Make sure to claim a credit for these excess taxes on your 1040 as additional federal taxes paid in.
For Example:
Let’s say you work for two employers and earn $75,000 from each employer. Employer #1 withholds $3,150 in social security taxes ($75,000 * 6.2%). Employer #2 also withholds $3,150 in social security taxes – for a total of $9,300 in social security taxes withheld during the year. Since the maximum social security taxes that you should pay through payroll withholdings for 2013 is limited to $7,049, the excess of $2,251 counts as additional federal income taxes paid in by you.
| A) ? Social security taxes withheld by Employer #1 |
$4,650.00 |
| B) ? Social security taxes withheld by Employer #2 |
$4,650.00 |
| C) ? Total social security taxes withheld during the year (A+B) |
$9,300.00 |
| D) ? Social security max for 2013 |
$7,049.00 |
| E) ? Excess social security taxes withheld (C-D) |
$2,251.00 |
A great place to find out more about your social security taxes and projected benefits is at the Social Security Administration’s website located at www.ssa.gov, or learn about what’s new for the 2014 Social Security Changes.
FYI: The social security wage base has been increased each year. The wage base maximum has been increased as follows:
2014 wage base max: $117,000
2013 wage base max: $113,700
2012 wage base max: $110,100
2009, 2010 & 2011 wage base max: $106,800
2008 wage base max: $102,000
2007 wage base max: $97,500
2006 wage base max: $94,200
2005 wage base max: $90,000
2004 wage base max: $87,900
2003 wage base max: $87,000
2002 wage base max: $84,900
2001 wage base max: $80,400
by The MDTAXES Network | Jul 18, 2013 | Planning, Taxes
From IRS Tax Tips:
Late spring and early summer are popular times for weddings. Whatever the season, a change in your marital status can affect your taxes.? Here are several tips from the IRS for newlyweds.
- It?s important that the names and Social Security?numbers that you put on your tax return match your Social Security Administration records. If you?ve changed your name, report the change to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get this form on their website at SSA.gov, by calling 800-772-1213 or by visiting your local SSA office.
- If your address has changed, file Form 8822, Change of Address to notify the IRS. You should also notify the U.S. Postal Service?if your address has changed. You can ask to have your mail forwarded online at USPS.com or report the change at your local post office.
- If you work, report your name or address change to your employer. This will help to ensure that you receive your Form W-2, Wage and Tax Statement, after the end of the year.
- If you and your spouse both work, you should check the amount of federal income tax withheld from your pay. Your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4, Employee’s Withholding Allowance Certificate. See Publication 505, Tax Withholding and Estimated Tax, for more information.
- If you didn?t qualify to itemize deductions before you were married, that may have changed. You and your spouse may save money by itemizing rather than taking the standard deduction on your tax return.? You?ll need to use Form 1040 with Schedule A, Itemized Deductions. You can?t use Form 1040A or 1040EZ when you itemize.
- If you are married as of Dec. 31, that?s your marital status for the entire year for tax purposes. You and your spouse usually may choose to file your federal income tax return either jointly or separately in any given year. You may want to figure the tax both ways to determine which filing status results in the lowest tax. In most cases, ???? it?s beneficial to file jointly.
For more information about these topics, visit IRS.gov. You can also get IRS forms and publications at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
by The MDTAXES Network | Mar 28, 2013 | Uncategorized
From the IRS Tax Tips News:
If you were married or divorced and changed your name last year, be sure to notify the Social Security Administration before you file your taxes with the IRS. If the name on your tax return doesn?t match SSA records, the IRS will flag it as an error and that may delay your refund.
Here are five tips for a person whose name has changed. They also apply if your dependent?s name has changed.
1.?If you have married and you?re using your new spouse?s last name or you?ve hyphenated your last name, notify the SSA. That way, the IRS computers can match your new name with your Social Security number.
2.?If you were divorced and are now using your former last name, notify the SSA of your name change.
3.?Letting the SSA know about a name change is easy. File Form SS-5, Application for a Social Security Card, at your local SSA office or by mail with proof of your legal name change.
4.?You can get Form SS-5 on the SSA?s website at www.ssa.gov, by calling 800-772-1213 or at local SSA offices. Your new card will have the same number as your former card but will show your new name.
5.?If you adopted your new spouse?s children and their names changed, you’ll need to update their names with SSA too. For adopted children without SSNs, the parents can apply for an Adoption Taxpayer Identification Number by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. The ATIN is a temporary number used in place of an SSN on the tax return. Form W-7A is available on the IRS.gov website or by calling 800-TAX-FORM (800-829-3676).
Additional IRS Resources:
IRS YouTube Videos:
IRS Podcasts:
by The MDTAXES Network | Nov 15, 2012 | Savings, Taxes
Each year, the government bumps up the maximum Social Security taxes that you can pay. For 2013, the maximum wage base jumps to $113,700, an increase of $3,600, or 3.3%, over the max of $110,100 that was in place for 2012.
The Social Security Administration predicts that 10 million individuals will end up paying higher taxes due to this increase, out of the estimated 163 million workers who will pay Social Security taxes next year.
At a rate of 6.2%, the maximum Social Security taxes that your employer will withhold from your salary is $7,049. This is $2,425 higher than the 2012 max of $4,624. Remember, the rate for the employee portion of the Social Security tax was reduced to 4.2% for 2011 only, and was then extended through 2012. Not only will high-income individuals pay Social Security taxes on an extra $3,600 in 2013, they, like all workers paying into the system, will also do so at a higher rate.
Higher Medicare Taxes Due To The Affordable Care Act:
As we wrote in?August, on June 28th, the Supreme Court upheld most of the provisions of The Patient Protection and Affordable Care Act, including the increase to the Medicare taxes high-income taxpayers will pay starting in 2013.
Starting in 2013, the employee portion of the Medicare tax jumps from the current rate of 1.45% to 2.35% on earned income in excess of $200k for single individuals and $250k for married couples filing a joint tax return. As of now, the employer will continue to match their employees’ Medicare taxes at a rate of 1.45%, which means the total Medicare tax will be 3.8% for high-income taxpayers.
For example, if you’re single, and earn $500k from your job, expect to pay $2,700 in additional Medicare taxes (($500k – $200k) * .9%) for 2013.
To increase taxes for high-income individuals even more, the Medicare tax will also apply to unearned income for the first time since this tax was enacted. People over the $200k or $250k threshold should expect to pay Medicare taxes at a rate of 3.8% on interest, dividends, capital gains, and net rental income beginning in 2013. You will pay this tax in addition to any federal and state income taxes due on this income.
Calculating the Self-employment Tax:
If you’re self-employed and earn more than $400 in net profit from your business, you’re subject to social security and Medicare taxes as well. Known as the “self-employment tax”, you’ll need to complete a Schedule SE to calculate this tax, and then report the amount due on page 2 of your Form 1040.
The self-employment tax is based on a social security tax rate of 10.4% and a Medicare tax rate of 2.9%. These rates are double those paid by employees, since a self-employed person must pay both the employee’s portion and the employer’s portion of both taxes. Remember, when you work as an employee, your employer matches the Social Security and Medicare taxes withheld from your pay.
Unlike most other taxes, when dealing with self-employment taxes, the more you earn, the less you pay in taxes. If you earn income as an employee and as an independent contractor, and your combined income exceeds $110,100 in 2012, make sure to complete Section B of the Schedule SE. Otherwise, your tax calculation will be incorrect and you’ll end up overpaying your self-employment taxes.
Do You Work For More Than One Employer in 2012 and Earn More Than $110,100?
For 2012, each of your employers withholds social security taxes from the first $110,100 that you earn from them. If you work for more than one employer and your total salary from all sources exceeds that threshold, you’ll have excess social security taxes withheld. Make sure to claim a credit for these excess taxes on your 1040 as additional federal taxes paid in.
For Example:
Let’s say you work for two employers and earn $75,000 from each employer. Employer #1 withholds $3,150 in social security taxes ($75,000 * 4.2%). Employer #2 also withholds $3,150 in social security taxes – for a total of $6,300 in social security taxes withheld during the year. Since the maximum social security taxes that you should pay through payroll withholdings for 2012 is limited to $4,624, the excess of $1,814 counts as additional federal income taxes paid in by you.
| A) Social security taxes withheld by Employer #1 |
$3,150.00 |
| B) Social security taxes withheld by Employer #2 |
$3,150.00 |
| C) Total social security taxes withheld during the year (A+B) |
$6,300.00 |
| D) Social security max for 2012 |
$4,624.00 |
| E) Excess social security taxes withheld (C-D) |
$1,676.00 |
www.ssa.gov
A great place to find out more about your social security taxes and projected benefits is at the Social Security Administration’s website located at www.ssa.gov.
FYI: The social security wage base has been increased each year. The wage base maximum has been increased as follows:
2013 wage base max: $113,700
2012 wage base max: $110,100
2009, 2010 & 2011 wage base max: $106,800
2008 wage base max: $102,000
2007 wage base max: $97,500
2006 wage base max: $94,200
2005 wage base max: $90,000
2004 wage base max: $87,900
2003 wage base max: $87,000
2002 wage base max: $84,900
2001 wage base max: $80,400
2000 wage base max: $76,200
