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how to calculate social security wages

how to calculate social security wages插图

Best answer

To calculate an employee鈥檚 Social Security wages, take the employee鈥檚 gross pay amount and subtract any exclusions such as reimbursed travel expenses and HSA contributions (see exclusions listed above). Simone earned $2,000 in hourly wages and $500 in commission during her last pay period, so she earned a total of $2,500 in gross wages.

People also ask

  • What are Social Security wages?

  • Social Security wages are an employee鈥檚 earnings that are subject to federal Social Security tax withholding (6.2% for the employer and 6.2% for the employee for the 2020 tax year). Employers must deduct this tax even if the employee doesn鈥檛 expect to qualify for Social Security benefits. Social Security wages include:

  • How are Social Security benefits calculated for retirement?

  • Social Security benefits in retirement are impacted by three main criteria: the year you were born, the age you plan on electing (begin taking) benefits and your annual income in your working years. First we take your annual income and we adjust it by the Average Wage Index (AWI), to get your indexed earnings.

  • How much will my employer withhold from my Social Security tax?

  • When an employee reaches the earnings limit, no more Social Security tax is withheld for the year. At 2021 rates, $142,800 would require $8,853.60 (total for both the employer and the employee) to be withheld for Social Security taxes. Who Is Subject to Social Security Wages?

  • How does Social Security calculate my wages for inflation?

  • Social Security uses a process called wage indexing to determine how to adjust your earnings history for inflation. Each year, Social Security publishes the national average wages for the year. You can see this published list on the National Average Wage Index page. 3

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