The Social Security tax rate of 6.2% is applied to the Wage Base and the 1.45% Medicare tax is applied to all income. Thus, employees are subject to an additional tax for Medicare on all income over the Wage Base.
If salary is only subject to Medicare tax (some teachers and some government workers), the tax rate of 1.45% is applied to all income and is reflected on output reports as Social Security tax.
In cases where the full Social Security tax is not applied, the code for "Salary/Wages Subject to" should be changed, use the following:
Leave the default value at Full Tax if salary is subject to full Social Security taxes including the Medicare tax of 1.45% on income above the Social Security wage base.
Select No Tax if Social Security taxes are not applicable (i.e. a few older government workers).
Select Medicare Only if salary is subject only to 1.45% Medicare tax (some government workers and some teachers).
Check the pay stub or a W-2 to see the % being withheld for Social Security tax. This item refers only to salary. All Self-Employment Income is subject to Social Security tax on self-employment income.
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