Social Security is a US social security program funded by payroll taxes. It provides benefits for retirement, disability, and death, and is funded by both employers and employees. Medicare taxes are also imposed, and some workers are exempt from paying Social Security taxes.
In the United States, Social Security is known as the Old Age, Survivors, and Disability Insurance (OASDI) program. It is a social security program enabled through specific payroll taxes called the Federal Insurance Contributions Act (FICA). By law, employers and employees must pay taxes to the government. Social security withholding is included in this tax payment.
In basic language, Social Security provides benefits for retirement, disability, and death. These are the benefits most commonly provided by private sector pension plans. They are also funded by taxes owed by the employee and the employer. The employer and employee are responsible for their own share of social security withholding.
An employee’s social security tax is withheld from their paycheck each pay date. The employer is responsible for paying all social security taxes owed. For each year the employee’s FICA contribution is assessed, she receives credit from the Social Security Administration for that year’s wages.
In addition to social security withholding, FICA has imposed employer and employee Medicare taxes. Consequently, FICA is made up of Medicare and Social Security. The Medicare program exists primarily to provide health benefits to retirees.
To fund the Medicare program, the employer and employee must pay separate payroll taxes. Although the employee’s portion of tax is deducted from their paycheck, the employer is responsible for ensuring that this deduction is made timely and accurately. So, in reality, the employer pays her and the employees’ share of FICA taxes.
There are some categories of workers that are exempt from paying Social Security taxes. State or local government workers who participate in an alternative retirement system implemented by their employer are exempt. So are college students employed in federal work-study programs, postdoctoral researchers, and teaching assistants or research assistants. Individuals in these assistant positions must also be graduate students receiving a stipend while performing these job duties or during a fellowship. Ministers or individuals performing a similar religious service, provided they possess an objection that is morally and religiously inclined toward their disbelief in public insurance, may also be exempt.
An employee’s federal income tax deductions are based on his filing status and the amount of allowances he claims. This flexibility sometimes allows you to control the amount of tax withheld from your paycheck. Social Security withholding cannot be adjusted because the government has imposed a fixed amount; The employer must pay these taxes or be subject to heavy penalties.
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