Tax Analysts provides news, analysis, and commentary on tax-related topics, including the latest developments under the Federal Insurance Contributions Act (FICA) and the Self Employment Contributions Act (SECA) tax.
FICA is an employment tax paid by both employers and employees that fund Social Security and Medicare. Social Security contributions provide old-age, survivors, and disability insurance benefits. Medicare contributions fund hospital insurance benefits for the elderly. In 2016, both employer and employee pay a 6.2 percent tax rate for Social Security on wages up to $118,500, and a 1.45 percent tax rate for Medicare on all wages (Publication 15).
SECA is an IRS self employment tax paid by self-employed individuals that is equal to the FICA tax rate that both employers and employees pay on wages. For 2016, the SECA tax rate for self-employed individuals is 15.3 percent. The Social Security portion of SECA is only owed on wages up to $118,500. Self-employed individuals must also pay the 0.9 percent additional Medicare tax if their income exceeds a threshold amount (Publication 17).
Individuals are subject to SECA if their net-earnings from self-employment are $400 or more. Self-employment tax is calculated on Form 1040, “U.S. Individual Income Tax Return,” using Schedule SE, “Self-Employment Tax.”
Individuals are permitted a deduction equal to the employer-equivalent portion of self-employment tax when calculating their adjusted gross income.
In addition to SECA and FICA tax rate news, analysis, and commentary, Tax Analysts also provides up-to-date statutes, regulations, and IRS guidance that are relevant to SECA and FICA that provide invaluable resources to practitioners.