Social Security Wages | Meaning and Definition

What are Social Security Wages?

They are the earnings or salary of an employee subject to the withholding of the federal social security taxes. The social-security taxes that are being withheld for the employee are 6.2%, and for the employer, it is 6.2%, according to the tax year 2020. They must not be paid to the employee by the employer if the employee doesn’t satisfy the need for social security benefits. 

Social security wages comprise: –

It refers to the salary of an employee that are subject to Social Security Tax.  Employers must deduct the tax even if the employee is not eligible for social security tax benefits. It comprises of certain items such as:
  •     Commissions
  •     Paid Time off
  •     Hourly and salaried wages
  •     Elective retirement contributions
  •     Bonuses
  •     Sick time
  •     Payments in other kinds
  •     The tip is more than $20 per month

For the year f 2021, these wages have a  minimum taxable income of $ 1,42,800 for the year 2021 which includes qualified wages of an employee.

What is excluded from the Social Security Wages?

Following items are excluded:

  • Tips (If their total is less than 20$ per month)
  • Business travel expenses that are reimbursed by the organization.
  • Employer paid health or accident insurance
  • Employer Health Saving Account contributions (HSA)
  • Compensation benefits of the workers
  • Family employee under the age of 18
  • Statutory non-employee payments
  • Wages paid to the disabled workers

Are tips included in the Social Security Wages?

Yes tips are included in the social security wages if the payment of tip is more than 20$. Tips that count as these Wages include:

  • Cash tips received from the customer 
  • Electronic tips (tips that are received through debit cards or credit cards from customers)
  • All the tips that are received from tip-sharing arrangements
  • The value of non-cash tips if any
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