Payroll professionals, take note—the Social Security Administration (SSA) recently announced new rules that impact how Social Security taxes should be processed in 2018.
New Wage Base
On every payday, a 6.2 percent Social Security tax is collected from both employees and their employers. This tax is only effective up until a certain amount of earnings, a cut-off point called a “wage base.” Effective January 1, 2018, the wage base for Social Security will increase from $127,200 to $128,700.
The SSA adjusts this number every year to reflect the ever-increasing cost of living. 2018’s modest increase pales in comparison to last year’s jump from $118,500 to $127,200, a whopping 7 percent adjustment that rocked the payroll community.
Collectively, Social Security and Medicare taxes make up “FICA,” which stands for the Federal Insurance Contributions Act. The Medicare tax rate is 1.45 percent—and unlike its counterpart, does not have a cut-off. A comprehensive SSA fact sheet covering the change can be downloaded here.