How to Deduct Social Security Tax Withholdings

By Grace Ferguson
Report the employee's yearly wages and tax withholding on her W-2 form.
tax forms image by Chad McDermott from

Social Security tax is also known as Old-Age, Survivors, and Disability Insurance, and is collected under the authority of Federal Insurance Contributions Act. According to the Social Security Administration, Social Security is not just a retirement program; it also applies to the disabled; the spouse, child or dependent parent of an employee who died; and the spouse or child of an individual who receives Social Security. Employers are required to withhold Social Security tax from employees' wages according to the rate the government sets.

Calculate employee pay. Social Security tax is withheld from gross wages. Therefore, you have to determine the employee's income before withholding the tax. Add up hourly employee wages based on their time card data. Multiply regular hours (those up to 40 for the workweek) by the employee's regular rate to arrive at gross regular wages. Multiply overtime hours (those exceeding 40 for the workweek) by the employee's overtime rate of 1 1/2 times his regular pay rate.

Compute salary. To arrive at gross salary, divide the employee's annual salary by the number of pay periods in the year. Suppose she earns $68,000, paid semi-monthly. Calculation: $68,000 / 24 semi-monthly pay periods = $2,833.33, semi-monthly salary.

Withhold Social Security tax at 6.2 percent of gross income, up to the yearly wage limit of $106,800 (as of 2010). Example: $2,833 x .062 = $175.67, semi-monthly Social Security withholding.

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