How to report Social Security and Medicare tax?

Other than income taxes, employers must withhold Social Security and Medicare taxes. These two taxes are also known as FICA (Federal Insurance Contributions Act) taxes. 

It’s how the majority of the funds are created for Social Security and Medicare benefits. As an employer, it’s your responsibility to pay the employee wages that are subject to Social Security and Medicare taxes. These taxes are taken out of employees’ income when processing payroll and paid on their behalf by you. 

Unlike income taxes where the withholding rate is different for some employees, the Social Security and Medicare taxes have a fixed rate set by the Socia Security Administration and the Internal Revenue Service. With a combined tax rate of 7.65 percent, 6.2 percent goes towards Social Security, while the remaining 1.45 percent is for Medicare.

When to report Social Security and Medicare taxes?

How and when you’re going to report FICA taxes all depends on where you report them. The Internal Revenue Service requires employers to report these taxes along with other payroll-related tax withholdings using Form 941 every quarter. Hence the name of Form 941 – Employer’s Quarterly Tax Return. The same form is also used for calculating the employer portion of these taxes. 

Another time you’ll report Social Security and Medicare taxes is at the end of the tax year/start of the new year. On Form W2, which is filed to report employee income and taxes withheld, employers must enter these two taxes withheld along with the total wages subject to these taxes. Employees then use their W2 to file their federal income tax return and if needed, report the Social Security taxes paid to the Social Security Administration.

How to file tax forms associated with Social Security and Medicare tax?

As mentioned above, you’ll need to file two tax forms, the 941 for every quarter and W2 at the end of the tax year when payroll is processed for the full tax year. 

After filling out the 941, you need to mail it to the Internal Revenue Service to report payroll-related taxes. You don’t need to issue a copy to your employees. As with Form W2, you need to file a copy for the Social Security Administration, state tax department, the employee, and one for your records. Take note that both of these tax forms are mandatory to file, and not filing them will result in paying penalties. You can learn more about these tax forms from our website.

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