OVERVIEW
Note: The content of this video applies only to taxes prepared for 2010. It is included here for reference only. Social security tax is collected by the government to fund the benefits of retirees and those unable to work. Discover how much you owe in social security taxes with help from TurboTax in this video on annual tax filing.
Video transcript:
Note: The content of this video applies only to taxes prepared for 2010. It is included here for reference only. We have updated the text to the current tax year as noted below.
Hello, I'm Jeremy from TurboTax, with important information about your Social Security Tax payments.
If you're employed, you may notice a line on your pay stub for Social Security, FICA, or OASDI. These all relate to the same Social Security Tax you must pay and are separate from your federal income tax. The government collects this money to fund the benefits you will eventually receive when you retire and to provide assistance to people who are enable to work.
Whether you are employed or work for yourself, you must pay 12.4 percent of the first $137,700 (in 2020) of your income to Social Security. However, if you are an employee, only 6.2 percent is taken from your wages and your employer pays the other 6.2 percent on your behalf. If you're self-employed, you must pay the entire 12.4 percent yourself, but you can deduct half of it on your federal income tax return. The amount you pay for the Social Security Tax always reduces the amount of your income, subject to the income tax.
Let me give you an example of how this works. If you earn $100,000 dollars per year at your job, $6,200 of it goes to pay Social Security taxes. Only the remaining $93,800 dollars is subject to income tax. So, at least, you're not being taxed twice on the same money if you are self-employed.
For more information about income taxes, visit TurboTax.com.
