How do you go about SSI wage reporting if you are creating paychecks for your business? Learn more in this guide to Social Security.
Are you among the 40% of business owners who take on payroll on your own? It’s a brave move and one that can be time-consuming and confusing.
You have to figure out the SSI wage reporting rules, along with state and local taxes. You don’t want to get in trouble with the tax authorities because you made a mistake. That can be very costly to your business.
Find out more about SSI taxes and how you can make sure that your business is reporting SSI wages.
What Are SSI Taxes?
SSI means social security income. The social security program was enacted by the Roosevelt administration in 1935. This was to provide economic security to Americans in retirement.
The program continues today, even though it’s often under political pressure. You may know it as OASDI, which stands for old-age, survivors, and disability insurance.
The way it works is that every working American makes a contribution to the program through a tax on earnings. When they reach retirement age, they can collect social security income. They can also collect if they are disabled and no longer able to work.
The amount they can receive depends on when they retire and how much they contributed over their careers.
SSI Wage Reporting and Your Business
SSI wage reporting impacts your business in a number of ways. The first is that you have to withhold a percentage of your employee’s income when you run payroll. That percentage is 6.2% of their wages.
As an employer, you withhold 6.2% from employees and match that contribution for a total of 12.4%.
Employers also need to withhold Medicare taxes, which amount to 1.45%. Again, you need to match the employee’s contribution. For employees that make more than $200,000 a year, you need to withhold an additional .9%.
For self-employed people, you are fully responsible for paying the full amount of OASDI and Medicare taxes. This is known as the self-employment tax, which comes out to 15.3% of your profits.
You may be familiar with the term FICA. This means Federal Insurance Contributions Act. This is the law that requires you to withhold and contribute to social security and Medicare.
FICA withholdings that appear on paystubs is the combination of OASDI and Medicare taxes.
Keeping Records of FICA Taxes
If you want to stay on the right side of the law, you need to maintain accurate records of what you paid employees and the amount of taxes that were withheld.
You need to maintain payroll records for four years, according to the IRS. That can be tricky if you use spreadsheets to do payroll. It would be in your best interest to use a check stub maker to keep accurate records in case your payroll taxes come into question.
A Simple Guide to Small Business Taxes
One of the most confusing areas of owning a business is accounting. That’s because there are so many taxes to keep track of. Not only that, you have reporting requirements to meet as well.
SSI wage reporting is confusing because it often gets mixed up with Medicare taxes and there are a number of terms that mean the same thing. Just remember that you withhold a percentage of wages and match it.
The percentage may change, so you want to check with the IRS or your accountant for the latest information.
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