FICA Limit for 2011, 2012

There is a FICA limit that defines the amount of tax that you and your employees are responsible for.

FICA tax, which stands for the Federal Insurance Contributions Act, includes two types of taxes that, as an employer, you must withhold from your employees' earnings. As the employer, you must pay this tax to the government.

FICA consists of a Social Security tax and Medicare tax. The Social Security portion includes Old Age, retirement and disability, while the Medicare portion consists of Hospital insurance. This tax is imposed on both employers and employees to fund these benefit programs.

The total FICA tax rate is 7.65%, which includes the Social Security tax rate of 6.2% and the Medicare tax rate of 1.45%. The FICA limit comes in to play by limiting the income to be taxed for the Social Security portion. The FICA limit stipulates that the income to be taxed is capped at $106,800, meaning if you earn more than $106,800 you still will only be responsible for tax on $106,800. The FICA limit does not affect the Medicare portion of the tax. The Medicare tax of 1.45% is taxed on all earnings with no limit.

If you own a small business and are interested in saving yourself time and money, as well as improving your system of organization, you may want to look at a small business software program such as QuickBooks Online Payroll. They offer an online program for a nominal fee that will calculate all of the necessary payroll taxes for you.

QuickBooks Online Payroll has the most up-to-date withholding tax tables available to create payroll. This program will pay your employees the correct amount and have all the necessary taxes withheld from their paychecks. Within the standard reports, the amount you are responsible for as the employer will be calculated for you.

QuickBooks Payroll also offers a guarantee that the software will pay for itself in the first 60 days or you'll get your money back. In addition, most of their software editions come with a 30-day free trial offer to try the software before you purchase it.

Visit QuickBooks online payroll to learn how they can save you time and money in areas regarding FICA tax, FICA limits, and all other aspects of preparing payroll.