Payroll Taxes are Mandatory
"I appreciate all the info you provided on the About.com website. It looks like I will have already paid my total federal tax through 2006 (Based on my withholdings and exemptions I will only owe $800) and there are still 7 months left to the year. I cannot raise my exemptions any more (9 currently claimed). It looks like the SS Tax and Medicare Tax are the only things being taxed every paycheck and if they continue I will probably get a refund for 2006.Sorry, but Social Security and Medicare taxes are mandatory, and in most cases they are not refundable."Is there any way that I can keep the money going to the SS Tax and Medicare instead of waiting until next year for a refund? I know employers are required to collect those taxes and add their share--is this something that only legislation could change? It seems as if there is a 7.65% tax for working in the US (15.30% if SE) even though many people will end up getting a refund. Do employers pay employees less knowing that they will have to pay the other 7.65% of these taxes for their employees and the full 15.30% for themselves? Everyone always says to have withholdings lowered so you have no tax or a small tax when April 15th comes around, but this seems impossible because of the SS & Medic. taxes. "
Social Security and Medicare taxes are called FICA or payroll taxes. And, as the reader correctly pointed out, the FICA rate comes to a total of 7.65% of your wages. But there's more than meets the eye. Payroll taxes are divided into Social Security taxes (6.2% on the first $98,400 of wages) and Medicare taxes (1.45% on all wages). You can reduce your FICA taxes slightly by contributing to group health insurance, including Health Savings Accounts. For more information, you can reference IRS Publication 15, Employer's Tax Guide. Also, if you have more than two jobs during the year and your wages exceed the Social Security wage base, your excess Social Security taxes can be refunded to you. Other than these two provisions, I don't know of any legal way to minimize your payroll taxes.
Even freelancers and other self-employed people cannot avoid the Social Security and Medicare taxes. They pay the Self-Employment Tax, which is 15.3% on net profits from their trade or business. The 15.3% combines both the employer's portion (7.65%) and employee's portion (another 7.65%) of payroll taxes. For in-depth information, you'll want to reference IRS Instructions for Schedule SE.
You forgot to tell this guy his assumption is flawed… of course he can increase his withholding allowances (claim more dependents). Use the IRS provided worksheet… if you’ve already paid your full year tax by mid year, you probably have deductions that can be converted to the right # of WH allowances on the worksheet in Pub 919.
Sorry, but Social Security and Medicare taxes are mandatory, and in most cases they are not refundable. HUH??? That dude better go back and actually READ “THE LAW” before telling people taxes are mandatory!!! There’s too many idiots who don’t read the law and give people false info. First: There is NO LAW in this country that requires people to even have a SSN to live & work in this country, the SSA will tell anyone who asks. Secondly: The W-4 Form is nothing more than an AGREEMENT between you and your employer, and can be terminated at any time by either party. People need to wake up, read and the laws themselves.
TITLE 26 – INTERNAL REVENUE CODE
Subtitle F – Procedure and Administration
CHAPTER 79 – DEFINITIONS
(26) Trade or business
The term “trade or business” includes the performance of the
functions of a public office.
You be the judge for now on when you read the IRS “pamphlets”
I am deducted for MEDICARE on my leave and earnings statement. I draw full Social Security although I still work, but pay MEDICARE through Social Security. Why do I pay twice for MEDICARE? Can I get reimbursed for one or the other?