BusinessTax

FICA Tax Rate 2021

FICA tax rate 2021 is the same as any other year. FICA (Federal Insurance Contributions Act) tax is made up of two different taxes. Both of these taxes are withheld from the employee’s income when processing payroll.

Employees pay 6.2% Social Security tax and 1.45% Medicare tax. If the employee earns more than $200,000 annually, there is an additional 0.9% Medicare tax on top of the 1.45%.

FICA tax the employees pay in total is likely to remain at 7.65% combined. On the other hand, employers match the employee’s FICA taxes and pay the IRS. In total, both the employee and the employer is subject to a 15.3% FICA tax. Since employers are going to know the amount they need to pay, there isn’t a need for additional calculations for themselves.

Employers are required to report FICA taxes withheld from employee’s income using Form 941 along with other taxes. On Form 941, employers will report the following taxes.

  • Income Taxes (Federal, State, Local)
  • Social Security Tax
  • Medicare Tax

Form 941 is also used for paying the employer portion of Social Security and Medicare taxes.

Report FICA Taxes

Employers must fill out Form 941 for every quarter. Not only the employers are going to enter the amount of Social Security and Medicare tax withheld but the wages subject to these taxes. If you’re filing a paper Form 941, you must mail it to the IRS. The mailing address in which you’re going to use depends on the state of residence and whether or not it is mailed with payment.

As for e-filing Form 941, it is possible through the IRS Free File. As long as you qualify, you can file Forms 941 for every quarter for free. Learn more about filing Forms 941 in 2021 from here.

Possible Cut to FICA Taxes in 2021

Social Security tax subject to employee’s income is waived starting from September 1, 2020. It is unknown how long the Social Security tax is going to be suspended. After the announcement, Trump added that he plans on bringing permanent cuts to payroll taxes if he is victorious in the upcoming elections.

This begs some questions about the future of FICA taxes. If there were to be cut to the Social Security tax, both the employees and the employers would have a larger cash flow. Whether there will be changes to the overall FICA tax rate or not, we will keep you updated. In the meantime, the eyes are on November 3rd for the election results.

FICA Tax Rate 2021

0%

5

FICA tax rate 2021 is the same as any other year. FICA (Federal Insurance Contributions Act) tax is made up of two different taxes. Both of these taxes are withheld from the employee's income when processing payroll.

User Rating: 3.93 ( 2 votes)

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button