Social Security Tax

• Employers withhold 6.2 percent of employees' wages for Social Security. The employer's contribution must match the amount withheld. The taxes collected from employers and employees go into the Social Security Trust Fund. Withholding continues until the employee's gross wages for the year reach $106,800. This limit can change annually when there is a cost of living adjustment.
  
  

Social Security's Medicare

• A separate tax of 1.45 percent goes into the Medicare Trust Fund to finance Medicare Hospital Insurance benefits. Workers who pay this tax receive Medicare's hospital insurance premium-free when they retire or become disabled. The taxable limit on wages previously equaled that of the Social Security tax, but the Medicare limit began to rise in 1991. Beginning 1994 there was no longer any limit.
  
  

Self-Employment Taxes

• The Social Security tax rate for self-employed taxpayers is 12.4 percent on the net profit from self employment. The self-employed also pay 2.9 percent for Medicare, for a total tax of 15.3 percent. The income limits for Social Security taxation is the same as for wages. If taxable net profit exceeds the limit, self-employed individuals continue to pay a 2.9 percent Medicare tax on all net profit.
  
  

Untaxed Earnings

• All gross wages before deductions may not be subject to Social Security and Medicare taxes. The gross may include amounts paid by the employer into an employee insurance or annuity plan. Some of the gross may include funds the employer provided for a "cafeteria plan," which the employee can use to purchase benefits such as health or life insurance. Employees can calculate the actual wages covered by Social Security by multiplying the Social Security tax withheld by 100 and dividing the result by 6.2. To use Medicare tax withheld they would divide the result by 1.45.
  
  

Possible Tax Refunds

• If an employee had more than one job during a year, each employer will withhold Social Security taxes. If the combined wages for the year exceed the withholding limit, the employee may have overpaid Social Security taxes. The employer must file a form 941X with IRS to obtain a refund for the employee. If the employer doesn't, the employee can complete IRS Form 843 and submit it with a copy of the W2 for each job.