Table H: Federal Information, Taxes, Income Ceilings, and Minimum Wage Standards SR 02-02, 01/02 (FAM-A)

FIT

(Federal Income Tax)

FICA

(Medicare Tax)

FICA

(Social Security Tax)

Minimum Wage

See IRS Circular E

1.45%

7.65%

$5.15/hour

1.  Self-employed individuals pay a FICA withholding amount of 15.3% (2.9% for Medicare and 12.4% for Social Security tax), but they deduct one-half of their FICA tax paid on their federal income taxes. This reduces their FICA contribution to 7.65%.

2.  The income ceiling subject to the full FICA withholding rate is $84,900.

3.  There is no upper limit to the amount of gross earned income from which Medicare may be withheld.

4.  Individuals age 65 and older are not subject to a maximum earnings test and can earn any amount of money without affecting Social Security benefits.

5.  The maximum amount an individual under age 65 may earn without affecting Social Security benefits is $11,280 a year or $940 per month.

6.  A modified earnings test applies the year in which an individual turns age 65. For any months in a calendar year before the individual turns age 65, the individual may earn up to a total of $30,000 a year or $2,500 per month without affecting Social Security benefits.

EXAMPLE

Mr. Green turns age 65 on May 2. His cumulative monthly earnings for January, February, March, and April are $9,000. His Social Security benefits are unaffected. Beginning on May 1, his earnings are no longer subject to an earnings test.