Category

Social Security Administration Reports

Social Security Wage Base Rises to $142,800 for 2021

The Social Security (Old-Age, Survivors, and Disability Insurance) taxable wage base is to increase to $142,800 for 2021, up from $137,700 for 2020, the Social Security Administration announced October 13, 2020.

The maximum 2021 Social Security component of the Federal Insurance Contributions Act tax payable by each employee is $8,853.60, which is 6.20% of the taxable wage base, up from $8,537.40 for 2020. Employers match the employee amount with an equal contribution.

The Medicare (Hospital Insurance) tax rate remains 1.45% and is applicable to all wages paid during the year. An additional Medicare tax of 0.90% applies to individuals with annual earned income of more than $200,000, and $250,000 for married couples filing jointly, the agency said. While employers are required to pay a matching 1.45% portion of the standard Medicare tax, employers are not required to pay a matching 0.90% portion of the additional Medicare tax.

For 2021, an employee who earns exactly $142,800 is subject to a total FICA tax (Social Security tax plus Medicare tax) of $10,924.20 ($8,853.60 + $2,070.60), up from $10,534.05 for 2020.

Employees are to earn one credit for each $1,470 of earnings paid in 2021, up from $1,410 in 2020, the SSA said. Employees may earn a maximum of four credits in a year. Those who receive the maximum wages taxable under Social Security in any year also receive four coverage credits. Employees must be credited with a certain amount of work earned under Social Security to qualify for benefits.

The Social Security earnings limit for workers who reach full retirement age increases to $50,520 in 2021, up from $48,600 in 2020, the SSA said. The earnings limit applies only to workers who retire in the year they reach retirement age. After earnings reach this limit, $1 in benefits is withheld for every $3 in earnings exceeding the limit only in those months preceding the month full retirement age is reached. There is no limit on earnings from the full retirement-age month and later.

The earnings limit for workers who retire before reaching full retirement age increases to $18,960 in 2021, compared with $18,240 in 2020, the SSA said. One dollar in benefits is to be withheld for every $2 in earnings that exceed this limit, the SSA said.

The SSA also said a cost-of-living increase of 1.30% is to take effect for 2021, compared with 1.60% in 2020, affecting several thresholds for benefits and coverage.

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Social Security Interest Rates Remain Constant for Third Quarter 2018

The Internal Revenue Service has announced that interest rates related to OASDI will remain the same for the calendar quarter beginning July 1, 2018. The interest rates are as follows: five percent for over-payments (four percent in the case of a corporation); five percent for underpayments; seven percent for large corporate underpayments; and two-and-one-half percent for the portion of a corporate over-payment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the over-payment and underpayment rate is the federal short-term rate plus three percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus three percentage points and the over-payment rate is the federal short-term rate plus two percentage points. The rate for large corporate underpayments is the federal short-term rate plus five percentage points. The rate on the portion of a corporate over-payment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half of a percentage point.

These interest rates are computed from the federal short-term rate based on daily compounding determined during April 2018.

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OASDI Wage Base Projected to Increase in 2019

In the Social Security Administration’s 2018 OASDI Trustees Report issued June 5, 2018, the Social Security wage base is projected to increase to $132,300 in 2019 from $128,400 in 2018.

The projection is based on the intermediate-cost assumptions in the report, the SSA said.

The wage base is the maximum amount of earnings subject to the Old-Age, Survivors, and Disability Insurance payroll tax. No increase in the wage base occurs if there is no cost-of-living adjustment effective for December of the preceding year, the SSA said.

The low-cost and the high-cost assumptions also project an increase to $132,300, the board of trustees’ annual report said.

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