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For Top Earners, Payroll Tax
Takes Bigger Bite Next Year
(Riverwoods, ILL., October 21, 1998) -- If you are a
highly paid employee, your taxes just went up by $260.40
for 1999, according to CCH INCORPORATED, a leading
provider of pension, tax and business law information.
This is due to an increase in the wage base on which
Social Security taxes are due, from $68,400 in 1998 to
$72,600 in 1999. CCHs Payroll Management Guide
reported the increase based on figures released by the
Labor Department and the Social Security Administration.
The amount will be officially published in the Federal
Register by the end of October.
The tax increase will show up in the amount of FICA
(Federal Insurance Contribution Act) tax deducted from
the paychecks of those earning above the 1998 wage base.
Although the tax rate for the Old-Age, Survivors and
Disability Insurance (OASDI) portion of FICA remains at
6.2 percent, the amount of wages subject to the tax can,
and usually does, increase each year, based on a national
wage index. The $72,600 wage base for 1999 is $1,200
higher than an earlier estimate published in the 1998
Annual Report of the Board of Trustees of the Federal,
Old-Age, Survivors and Disability Insurance (OASDI) Trust
Funds issued in April of this year. The taxes paid by
employees are matched by identical amounts paid by
employers into the Social Security system.
The tax rate for this "Hospital Insurance,"
or Medicare portion of FICA, is 1.45 percent and applies
to every dollar of earnings. This amount is also matched
Taxes for self-employed individuals use the same
earnings base, but their rates are double those of
employees since they must also pay the
"employer" portion of the taxes. This means
that high-earning, self-employed individuals may owe as
much as $520.80 in additional self-employment tax in
1999. However, they can recoup some of this amount
through a deduction on their federal income tax.
Future Benefits Also Affected
The "wage base" is also a "benefits
base," CCH noted. Only earnings up to the wage base
are considered in calculating Social Security benefits.
Thus, those who pay more now should receive more later.
Some private pensions use the amount of "covered
compensation" -- that is, compensation up to the
wage base -- in calculating their benefits as well.
In 1999, there will be no increase in the amount of
wages paid to a domestic worker that is not subject to
FICA taxes. You can pay a domestic worker such as a maid
or baby sitter up to $1,100 in 1999 without having to
wrestle with federal withholding on the wages.
About CCH INCORPORATED
CCH INCORPORATED, Riverwoods, Ill., is a
leading provider of health and human resources
information, including Payroll Management Guide,
Pension Plan Guide, Employee Benefits Management, Social
Security Reporter and Unemployment Insurance
Reports. CCH also provides tax and business law
information in print and electronic form for accounting,
legal and healthcare professionals. CCH is a wholly owned
subsidiary of Wolters Kluwer U.S.
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