Negosentro.com | For both employees and employers, Social Security is always a hot topic. Especially for new businesses, they’re working hard on growing the company but still need to worry about ensuring their employees are paying Social Security tax while also paying it themselves.
What’s Social Security Tax?
In case you haven’t seen previously, perhaps you’re a small business who suddenly needs to know more about how it all works, Social Security tax is an amount collected from employers and employees to fund retirement benefits for US workers. Additionally, it supports survivorship and disability benefits. Every single year, millions of American citizens collect money as a result of the OASDI (Old-Age, Survivors, and Disability Insurance) program. This is essentially the name for Social Security, and it plays an important role.
As mentioned, both employees and employers come together to pay 12.4% of a single worker’s earnings. For example, the employer will pay 6.2% while the employee contributes another 6.2%. For those who are self-employed, they are generally responsible for providing the full 12.4% themselves.
With this in mind, it makes for a considerable contribution from both employers and employees. This shouldn’t have an impact on how many employees you should hire. So, how do we benefit?
How We Benefit from Social Security Payments
While working or running a business, it might seem a nuisance to have to make Social Security payments, but it all comes around full circle. As an employee, it’s important to pay into Social Security because it’s something we will all benefit from eventually. For all qualified disabled people and retirees, it provides payments. Not only are these payments helpful for you, but they will also help survivors should you have an accident, as well as spouses, children, and other loved ones.
If you don’t pay into Social Security and accrue a total of 40 credits, you won’t be eligible for the benefits as you grow older. Suddenly, this means you don’t get help after retirement, your family could be left without help if you pass away, and there are other repercussions to be cautious of. Basically, each ‘credit’ is earned from a full-paying quarter. Therefore, every employee has a chance to earn four credits per calendar year.
As an employee, it makes sense to pay into Social Security for these reasons. It provides protection for yourself, it gives peace of mind, and you can be happy in the knowledge that spouses and children get support after you die.
For employers, the advantages are very similar. If you’re matching employee contributions, you’re helping them to earn their credits for later life. After all, employees are individuals with families, and you can help them to protect these families with Social Security payments. By paying the 6.2%, you keep employees happy, and this has an opportunity to improve motivation. The more you help them, the further they will be willing to go for the company. If you are unsure how much you should be paying, or need assistance with your books, you can use online benefits administration software to help you keep track of your social security payments for you and your employees.
Furthermore, we should also mention the potential penalties if you fail in your duty to collect or withhold FICA taxes. If payments aren’t made on time, it’s within the rights of the IRS to impose penalties. Known as a Trust Fund Recovery Penalty (TRGP), the amount can vary, and it can harm the reputation of your company.
Get Help Today
If you’re worried about getting this wrong or are concerned, you won’t have the time to help employees and get the correct systems set up, and we recommend outsourcing to a third-party today. With an outsourced payroll/HR specialist, they will handle everything on your behalf as experts in the field!