How to Calculate Payroll Social Security Withholding

The Social Security tax is a federal tax charged on the earnings of particular individuals. The basic components which are taken into account are the employee and employer’s percentage, set by Security Administration, along with the employee’s monthly income. An employer therefore must hire an accountant who is able to calculate the amount which needs to be withheld from an employee’s pay check every month, before adding the total sum he or she needs to set aside on behalf of the company.


  • 1

    Visit the Social Security Administration website to check the Social Security tax rate, and the limit applied to the earnings of particular individuals. The rate, as of 2012, is determined at 10.4 percent, applied on the first $110,100 of your income. Check your income range, which will allow you to decide whether any Social Security tax withholding will be applied in your case.

  • 2

    Consider the Social Security tax rate of both the employer and the employee. The portion has remained relatively the same since 1990, where the percentage charged from the employer section is 6.2. As for the employee, the rate has dropped down to 4.2 percent.

  • 3

    Divide the two percentages, i.e. employer's and employee's, by 100 to convert them into decimal figures. They will compute to 0.062 and 0.042 respectively.

  • 4

    The product of the employee rate and the wages he or she earns will help you determine the total amount which will be withheld by the company from the paycheck as Social Security taxes. For instance, if the employee earns $3000 per month, then the resulting amount a company must withhold will equal to – (3000 x 0.042) $126.

  • 5

    Now determine the amount the company will need to pay to the government in employer Social Security taxes. Taking into account the current scenario, the employer’s tax rate will be multiplied by the employee’s monthly wages i.e. $3000 x 0.062 which equals $ 186 - paid by the employer or withheld from the employer’s wages as Social Security tax.

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