Hiring Glossary
Social Security Wages refer to employees’ earnings that are subject to Social Security taxation. These wages are crucial for determining Social Security benefits and ensuring compliance with government regulations.
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As a business owner or human resources manager, you may come across the term 'social security wages' in the context of payroll and taxation. Social security wages refer to the total amount of an employee's earnings that are subject to Social Security tax withholding. This includes not only regular wages but also bonuses, commissions, and certain fringe benefits. Understanding social security wages is crucial for accurate payroll processing and compliance with federal tax regulations.
For example, if an employee earns a base salary of $50,000 and receives a $5,000 bonus within the same year, their social security wages would total $55,000. Both the employer and the employee are required to contribute 6.2% of these wages to the Social Security program, up to the annual wage base limit, which is $176,100 for 2025. Accurate calculation and reporting of social security wages ensure that both parties meet their tax obligations and that employees receive appropriate credit toward future Social Security benefits.
Social security wages include:
These examples form part of taxable earnings when calculating the Social Security tax. Employers withhold Social Security taxes from employees' wages and report these earnings to the government.
Social Security wages exclude the following types of income:
These exclusions reduce the amount subject to Social Security tax.
Social Security tax is a payroll tax in the United States that funds the Social Security program, which provides benefits to retirees, disabled individuals, and survivors of deceased workers. It is part of the Federal Insurance Contributions Act (FICA) and is automatically deducted from an employee's paycheck by their employer. Both employers and employees contribute 6.2% (a total of 12.4% on eligible wages) to Social Security tax. Under the Self-Employment Contributions Act (SECA), self-employed individuals are responsible for paying both the employee and employer portions of the tax.
The wage base limit is the maximum taxable amount of an employee's earnings that is subject to Social Security tax in a given year. Any income earned above this limit is not taxed for Social Security purposes, though it remains subject to Medicare tax and possibly other taxes.
The wage base limit is $168,600 for 2024. This means that only the first $168,600 of an employee's earnings are subject to the 6.2% Social Security tax. Any earnings above that amount are not taxed for Social Security purposes.
Most employees and self-employed individuals are subject to Social Security wages. Employees contribute through payroll taxes, while self-employed individuals pay both employee and employer portions. U.S. citizens working abroad for American employers may also be subject, though there are exceptions for certain government workers, independent contractors, and religious groups.
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Social Security Wages are calculated based on salaries, wages, and other compensation subject to Social Security taxes.
Social Security wages determine eligibility for Social Security benefits in retirement, influencing employees' financial security.
Errors in reporting Social Security wages can result in penalties and fines for employers, as well as discrepancies in employees' Social Security benefits.
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ABOUT THE AUTHOR
Marcelle van Niekerk
Marcelle is a skilled Content Manager at Playroll, a leading global HR platform. With a passion for storytelling and a keen eye for trends, Marcelle specializes in crafting insightful content about remote work, global employment, and the evolving dynamics of the modern workforce.
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