![]() Any qualifying income above the Social Security wage base does not incur any Social Security taxes. The Social Security tax doesn't always apply to all of your income. Other funding comes from interest earned on the balance in the Social Security trust fund as well as the taxation of Social Security benefits. Combined, these are commonly referred to as the 6.2% Social Security tax. The second, Disability Insurance (DI), is taxed at 0.9% (or 1.185%. The first, Old-Age and Survivors Insurance (OASI), is taxed at a rate of 5.3% (or 5.015% prior to 2019). Technically, this tax is broken down into two parts. ![]() Social Security benefits are funded from three major sources. ![]() The taxes get paid into a trust fund that is used to pay for Social Security benefits for current recipients. This results in a total contribution of 12.4% of your qualifying earnings. ![]() Today, the tax requires employees to pay 6.2% of qualifying earnings. Others, such as self-employed individuals, typically pay their own Social Security tax as both the employee and the employer. For most people, the tax is withheld from your paycheck with an equal amount paid by your employer. Social Security is a payroll tax that is used to fund Social Security benefits. How and why the Social Security tax is levied Here's what you need to know about how the Social Security tax works today. Since its inception, additional benefits have been added to the Social Security program, including survivors' benefits, disability benefits, and more. This tax was designed to fund the Social Security benefits that would be paid out. It set the groundwork for the Social Security payroll tax that started getting collected in 1937 under the Federal Insurance Contributions Act (FICA). The concept was implemented in the Social Security Act of 1935, which provided benefits for the primary worker in a family when they retired at age 65. In addition to the above documentation, individual payees may use a worksheet or ledger to document all deposits and expenses for the beneficiary/recipient.Social Security didn't always exist. NOTE: A payee must save records for at least two years and make them available to SSA upon request.Īn organizational payee must establish some form of accounting system that will track the following information for each beneficiary/recipient:
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