The Social Security tax rate for the year 2007 is 6.2% on the first $97,500 of an individual’s 2007 salaries and wages. (In 2006, the Social Security tax was 6.2% on the first $94,200 of salaries and wages.) Social Security tax is the largest portion of the tax referred to as FICA.

The other part of FICA is the Medicare tax which is 1.45% of the entire amount of an individual’s salaries and wages. In other words, the FICA tax is 7.65% of the first $97,500 of an individual’s 2007 salaries and wages and then 1.45% on the 2007 salaries and wages in excess of $97,500.

Companies must withhold the Social Security and Medicare taxes from employees and must also match that amount. For an employee earning $50,000 in the year 2007, the employer is required to (1) withhold $3,825 from the employee, (2) incur an additional expense of $3,825 because of the matching, and (3) remit both amounts—a total of $7,650—to the federal government.

You can get more information on federal payroll taxes by visiting www.irs.gov.

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

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