Why does Heritages Social Security Calculator use both the employer and employee shares of the payroll tax?
Whether they realize it or not, workers really do pay a full 10.6 percent of their wages into Social Security’s Old Age and Survivors program. From an accounting perspective, workers pay 5.3 percent of their wages into the program, and their employers pay the same. But this division in the payroll tax is artificial, however, as employers regard their part of the payroll tax as an expense of hiring, just like wages and other benefits: In other words, it is money that the employer is willing to spend on his workers. Though workers see only a 5.3 percent deduction on their pay stubs for Social Security’s Old Age and Survivors program, they really pay the whole 10.6 percent tax in terms of foregone wages. Self-employed workers are well aware of this fact. They pay the entire 10.6 percent tax directly.
Related Questions
- If a new employee has reached the limit for social security taxes with a previous employer in the same year, does the new employer need to take out the tax for both the company and employee?
- Can the employer claim both the business tax credit and the social security tax exemption for a qualified employee?
- Why does Heritages Social Security Calculator use both the employer and employee shares of the payroll tax?
