January 18, 2019

2019 Withholdings for Social Security, Medicare and Pensions

Part 3 of the Anders Annual Payroll and Withholding Update outlines social security tax withholding, additional Medicare tax withholding, and pension distribution withholding rules for 2019.

Social Security Tax Withholding

For 2019, the Social Security tax wage base for employees will increase to $132,900.  The Social Security tax rate for employees and employers remains unchanged at 6.2%.  The combined Social Security and Medicare tax rate for employees and employers remains unchanged at 7.65%.  Medicare tax will also apply on all wages in excess of $132,900 and will be imposed at a rate of 1.45% for both employees and employers.

The earnings base for self-employment tax will also increase to $132,900 with an effective rate of 15.3%.  Medicare tax will also apply on all self-employment income in excess of $132,900 at an effective rate of 2.9%.  No self-employment tax is payable if annual net earnings are less than $400.

Additional Medicare Tax Withholding

All wages currently subject to Medicare tax are subject to an additional 0.9% Medicare tax withholding when wages exceed $200,000. There is no employer share of additional Medicare tax.

Pension Distribution Withholding Rules

If an employee does not elect a direct rollover (a trustee to trustee transfer), the employer must withhold federal income tax from the distribution at a 20% rate.  The withholding is required even if the employee executes the rollover personally.  The rules contain some exceptions to the general rule stated above.  Please contact us to discuss these rules in greater detail if a pension distribution is forthcoming.

Contact an Anders advisor with any questions on how these amounts affect you.

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