Employers – 2015 FICA Tax Changes to Know

As a small business owner, wouldn’t it be nice if payroll taxes just stayed the same from one year to the next? You would know what’s expected of you and how to manage your company’s payroll taxes every year. Unfortunately, that’s just not the case. As of January 1, 2015, the government has made some FICA tax changes that employers need to be aware of since these changes will affect your company’s ability to accurately process your payroll.

Note that these changes are adjustments mandated by Federal laws, not state laws. That means they pertain to every business, not just those here in Indiana.

Social Security

did you knowThe 2015 wage base per employee for Social Security has increased to $118,500. According to the Social Security Administration, about 10 million workers will pay higher taxes because of this increase in the taxable maximum amount of earnings that are subject to Social Security tax.

The Federal Insurance Contributions Act (FICA) tax rate for both the employer’s and employee’s portions of the tax remains unchanged at 6.2%, amounting to a total Social Security FICA tax of 12.4%, paid on income up to $118,500. The maximum Social Security tax that can be withheld from wages in 2015 is $7,347.

As an employer, you need to make sure your payroll system is adjusted to account for this higher taxable maximum amount. Also, you should let any employees who are affected by this tax change know that they will be paying more in FICA tax this year.


Similar to previous years, there is no limit on the amount of wages that are subject to the Medicare tax. And the tax rate paid by both employers and employees stays the same at 1.45% each (a total of 2.9%).

Total FICA Tax

For most workers, a total FICA tax of 15.3% is withheld on wages (half of the amount paid by employees and half paid by employers).

Note: If you’re a self-employed small business owner, you’re responsible for paying the entire FICA tax rate of 15.3% (12.4% for both the employee and employer portions of the Social Security tax and 2.9% of both the employee and employer portions of the Medicare tax).

Additional Medicare Tax

Under the Affordable Care Act, higher wage earners in 2015 must pay an additional 0.9% in Medicare tax. The annual compensation thresholds for this additional Medicare Tax are:

  • $250,000 for married taxpayers who file jointly.
  • $125,000 for married taxpayers who file separately.
  • $200,000 for single and all other taxpayers.

Employers don’t pay any additional Medicare tax.

The Payroll Department Ensures Payroll Tax Compliance

Keeping up with all of these constantly changing tax rules can seem overwhelming, but The Payroll Department can help. We can notify you when tax changes affect your small business, and we can ensure your payroll tax payments and filings are correct and on time. Call us today at 317-852-2568 for more information on why you should outsource your payroll taxes to us.

– Ariane of The Payroll Department Blog Team

Posted in: IRS and Tax forms, Payroll, Payroll Processing, Payroll Taxes, Rules, Regulations and Laws

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