VIEWpoint Issue 1 | 2022
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VIEWpoint Issue 2 | 2021
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Weathering the Storm of Rising Inflation
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The Social Security Administration (SSA) recently announced its wage cap and benefit amounts for the 2022 calendar year. Both amounts have increased from 2021 and account for cost-of-living adjustments (COLA) and inflation. Here is a breakdown of the new increased amounts.
The Federal Insurance Contributions Act (FICA) tax for wages is 7.65% for both the employee and employer. FICA is broken out into two parts:
Self-employed workers pay the entire 15.3% self-employment tax, which contains a 12.4% OASDI tax and a 2.9% HI tax.
The OASDI tax is applicable to most wages and self-employment income up to that year’s wage cap. In 2022, the base is $147,000, so the OASDI tax will only apply to a taxpayer’s first $147,000 in earnings. Individuals do not have to pay OASDI taxes on any earnings more than the wage cap, and the HI tax does not have its own wage cap.
Individuals earning more than $147,000 in 2022 must pay $9,114 in social security tax (the $147,000 cap x 6.2%) and their employers will pay the same amount. Self-employed individuals will pay $18,228 in Social Security tax ($147,000 x 12.4%).
Individuals with higher incomes are subject to the Additional Medicare Tax of 0.9%. The tax applies to wages or self-employment income greater than $250,000 for married taxpayers filing jointly, $125,000 for married taxpayers filing separately and $200,000 for anyone else. The Additional Medicare Tax is not impacted by the annual wage cap.
Lastly, a COLA will raise social security and Supplemental Security Income (SSI) benefits by 5.9% in 2022. The COLA is used to ensure inflation does not diminish the purchasing power of each of these benefits.
If you have questions about how these increased amounts may impact your unique tax situation in 2022, contact Doeren Mayhew’s tax advisors today.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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