Social Security Wage Base Increases in 2012

The Social Security Administration announced on October 19, 2011, that the 2012 social security wage base will be $110,100; up from $106,800 where it had been set for the past three years.

• As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax.
• The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2012. The maximum social security tax employees and employers will each pay in 2012 is $6,826.20.
• The 2011 FICA tax rate was 4.2% for employees and 6.2% for employers under the Tax Relief Act of 2010, and that the rate is scheduled to be 6.2% for both employees and employers in 2012.

Self-Employed Individuals
The social security wage base for self-employed individuals in 2012 will also be $110,100. There is no limit on covered self-employment income that will be subject to the Medicare tax.

• The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%). In 2012, the maximum social security tax for a self-employed individual will be $13,652.40.
• The 2012 FICA tax rate for both employees and employers is scheduled to be 6.2%.

FICA Coverage Thresholds

• The threshold for coverage for domestic employees under social security and Medicare will be $1,800 in 2012, up from $1,700 in 2011.
• The coverage threshold for election workers will be $1,500 in 2012, unchanged from 2011.

Need guidance on closing 2011, preparing for 2012's health insurance reporting on Form W-2, and meeting payroll deadlines? Contact the payroll professionals at Yeo & Yeo.