With this time of year we often direct our attention toward the burden of preparing tax returns and paying the piper!
Of course, with continued pain, there are taxes throughout the year. One of these continuing concerns arise from employment taxes, a constant concern with each payroll undertaken.
As we know, the FICA tax seems to continue to grow in importance, since the rates and the base on which to apply the rates often grow each year. The FICA is a tax that falls on the employer and the employee. The amount is 7.65% on the applicable wage base for the employee and for the employer. Thus, the employee pays the 7.65% on the wages earned by the employee; and, the employer matches the same 7.65%. (There can also be additional employment taxes in some instances, e.g., when the employee’s wage base exceeds given levels)
The above FICA rate is made up of 2 parts, viz., the 6.2% Social Security part and the 1.45% rate that is the Medicare tax. These rates are applied against the wages of the employee as limited by the wage base, when applicable. However, what has recently changed is the movement up on the wage base. Recently released numbers from the Social Security Administration Office shows that the wage base for the 6.2% tax for 2024 is projected to be $167,700, moving up from the $160,200 that applies for 2023. Thus, this is another tax increase on the employee and employer. (Since this is only a projection, it is entirely possible that the increase may even be greater for 2024. The 2023 increase as projected was understated.)
The 1.45% Medicare tax has no maximum wage base. Thus, the taxes continue to climb as the wages climb.
What this means is that in addition to the attention given to the obligation to pay income taxes, taxpayers should also recognize the continuing concern with other taxes that may be owing—and growing—such as those for employment taxes.*
By Prof Mark Lee Levine, University of Denver
· For more on this subject, see Checkpoint by Thomson Reuters; see also Levine, Mark Lee and Segev, Libbi Rose, Real Estate Transactions, Tax Planning Appendix B (Thomson Reuters/West 2023).
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