Social Security Tax Withholding Stays The Same for 2010

With all the talk about rising rates and changing brackets, it is important to note that for 2010, the maximum wage base for social security tax will be unchanged. Here are some important facts and figures to take into consideration when planning for your 2010 taxes:

The Social Security tax wage base for employees will remain at $106,800.00. The combined Social Security and Medicare Hospital Insurance tax rate of 7.65% will still apply. The additional Medicare Hospital Insurance tax will apply on all wages in excess of $106,800.00 and will be imposed at a rate of 1.45%. The same rates will apply for employers.

The earnings base for self-employment tax will also remain at $106,800.00 with an effective rate of 15.3%. The additional Medicare Hospital Insurance tax will apply on all self-employment income in excess of $106,800.00 at an effective rate of 2.9% in 2010. No tax is payable if annual net earnings are less than $400.00.

Federal Unemployment Tax (FUTA)

For 2010, the maximum taxable wage base will be the first $7,000.00 of wages. The tax rate stays at 6.2% with the credit for payment of state unemployment tax remaining at 5.4%. This results in the effective rate staying at .8%.

State Unemployment Tax (SUTA)

The taxable wage base for Missouri will increase to $13,000.00 in 2010 and Illinois will increase to $12,520.00. Each state will issue your new contribution rate, effective January 1, 2010, based on your employment history. If advantageous, Missouri permits a voluntary payment to reduce the rate as long as the payment is received by January 15, 2010.

Both states require employers, who no longer have unemployment tax liability, to formally close their unemployment accounts. Severe penalties accrue if quarterly reports are not filed and accounts are not formally closed – even if no unemployment tax liability exists.

Need more information? Contact your tax advisor.