The maximum FICA tax for the year 2010 remains the same as the 2009 FICA tax: 7.65% on each employee’s first $106,800 of taxable earnings (such as wages, salaries, bonuses, etc.) plus 1.45% of any employee’s taxable earnings in excess of $106,800.

The FICA tax is withheld from each employee’s earnings and it is also matched by the employer. This means that the employer is required to remit 15.3% (employee’s 7.65% + employer’s 7.65%) of each employee’s first $106,800 of earnings in 2010 plus 2.9% (employee’s 1.45% + employer’s 1.45%) of any employee’s earnings greater than $106,800.

The FICA tax is really two taxes:

1. The Social Security tax of 6.2% which applies only to the first $106,800 of an employee’s taxable earnings (in year 2010 and in year 2009), and

2. The Medicare tax of 1.45% on every dollar of every employee’s taxable earnings.

Learn more about Payroll Accounting.

About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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