<img height="1" width="1" style="display:none;" alt="" src="https://px.ads.linkedin.com/collect/?pid=938154&amp;fmt=gif">

Employers: In 2023, the Social Security Wage Base is Going Up

The Social Security Administration recently announced that the wage base for computing Social Security tax will increase to $160,200 for 2023 (up from $147,000 for 2022).

Wages and self-employment income above this threshold aren’t subject to Social Security tax.

Basics About Social Security

The Federal Insurance Contributions Act (FICA) imposes two taxes on employers, employees, and self-employed workers.

One is for the Old Age, Survivors, and Disability Insurance program, which is commonly known as Social Security. The other is for the Hospital Insurance program, which is commonly known as Medicare.

There’s a maximum amount of compensation subject to the Social Security tax, but no maximum for Medicare tax. For 2023, the FICA tax rate for employers is 7.65% — 6.2% for Social Security and 1.45% for Medicare (the same as in 2022).

Tax-Impacts-for-Business-Owners-Inflation-Reduction-Act-and-MoreBIZ TIP: Tax Impacts for Business Owners: Inflation Reduction Act and More!

2023 Updates

For 2023, an employee will pay:

  • 6.2% Social Security tax on the first $160,200 of wages (6.2% of $160,200 makes the maximum tax $9,932.40), plus
  • 1.45% Medicare tax on the first $200,000 of wages ($250,000 for joint returns, $125,000 for married taxpayers filing a separate return), plus
  • 2.35% Medicare tax (regular 1.45% Medicare tax plus 0.9% additional Medicare tax) on all wages in excess of $200,000 ($250,000 for joint returns, $125,000 for married taxpayers filing a separate return)

For 2023, the self-employment tax imposed on self-employed people is:

  • 12.4% Social Security tax on the first $160,200 of self-employment income, for a maximum tax of $19,864.80 (12.4% of $160,200), plus
  • 2.9% Medicare tax on the first $200,000 of self-employment income ($250,000 of combined self-employment income on a joint return, $125,000 on a return of a married individual filing separately), plus
  • 3.8% (2.9% regular Medicare tax plus 0.9% additional Medicare tax) on all self-employment income in excess of $200,000 ($250,000 of combined self-employment income on a joint return, $125,000 for married taxpayers filing a separate return)

Employees With More Than One Employer

What happens if one of your employees works for your business and has a second job?

That employee would have taxes withheld from two different employers. Can the employee ask you to stop withholding Social Security tax once he or she reaches the wage base threshold?

Unfortunately, no.

Each employer must withhold Social Security taxes from the individual’s wages, even if the combined withholding exceeds the maximum amount that can be imposed for the year. Fortunately, the employee will get a credit on his or her tax return for any excess withheld.

Looking Forward

Contact us if you have questions about 2023 payroll tax filing or payments. We can help ensure you stay in compliance.

Request More Information

© 2022

Biz Tip Topic Expert: Holly Eisenhauer, CPA

Holly Eisenhauer, CPA

Holly is a Principal with SVA Certified Public Accountants and specializes in individual taxation with a focus on proactive tax planning and developing strategies to minimize current and future tax liabilities.

Awards and Affiliations

Forbes Names SVA as 2021 America's Best Accounting Firms
sva-certified-public-accountant-affiliation-accountingtoday-top100-firms-2021
sva-certified-public-accountant-affiliation-inside-public-accounting-top-100-firms-2021
milwaukee-business-journal-largest-milwaukee-area-accounting-firms-2022-logo2
sva-certified-public-accountant-affiliation-wicpa
sva-certified-public-accountant-affiliation-great-place-to-work-2021
sva-certified-public-accountant-affiliation-m-power-business-champion-program
sva-in-business-executive-choice-award
sva-certified-public-accountant-affiliation-aicpa
sva-certified-public-accountant-affiliation-aicap-ebpaqc-member

Locations

Madison, WI
1221 John Q Hammons Dr, Suite 100
Madison, WI 53717
(608) 831-8181

Milwaukee, WI
18650 W. Corporate Drive, Suite 200
Brookfield, WI 53045
(262) 641-6888

Colorado Springs, CO
1880 Office Club Pointe, Suite 128
Colorado Springs, CO 80920
(719) 413-5551

SVA BBB Business Review Man Standing

Contact

(888) 574-4782
info@SVAaccountants.com
BizTips

Are you in the know on the latest business trends, tips, strategies, and tax implications? SVA’s Biz Tips are quick reads on timely information sent to you as soon as they are published.

Connect With Us

Copyright © 2022 SVA Certified Public Accountants | Privacy Policy | Cookie Policy | CCPA