An employer’s Social Security contribution is 6.2% of each employee’s wages, paid on top of the 6.2% withheld from the worker’s paycheck. In 2026, that 6.2% applies only to the first $184,500 an employee earns, which caps the employer’s cost at $11,439 per employee for the year.1Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax2Social Security Administration. Contribution and Benefit Base The employer’s share is a separate business expense, not a deduction from the worker’s pay, and it is deductible on the employer’s federal income tax return.3Internal Revenue Service. Publication 334, Tax Guide for Small Business
The 6.2% funds Old-Age, Survivors, and Disability Insurance. Medicare is a separate 1.45% employer tax on all wages with no cap, deposited alongside Social Security but tracked to a different trust fund. Payroll systems and the IRS often lump the two together under “FICA,” so keep the pieces distinct on your books.
The Rate and the Wage Base in 2026
The employer rate is 6.2%, and the employee rate matched against it is also 6.2%, so 12.4% of covered wages flows into Social Security for each worker.4Internal Revenue Service. Publication 15, Employer’s Tax Guide Both stop once an employee’s year-to-date earnings with you hit $184,500. The cap resets every January regardless of what the employee earned the year before.
The wage base applies per employer, not per employee across all their jobs. If a worker earns $120,000 from two different employers in the same year, both employers withhold and match on the full amount from their own payroll. The employee can claim a refund of the excess employee-side tax on their tax return, but each employer pays its full 6.2% and has no refund mechanism.5Social Security Administration. Maximum Taxable Earnings Each Year
Calculating the Employer’s Share
Multiply gross pay for the period by 0.062. An employee earning $3,000 in a biweekly paycheck generates $186 in employer Social Security tax. Bonuses and commissions are treated the same way: a $10,000 year-end bonus adds $620 in employer tax, assuming the employee has not yet hit the wage base.
The mid-year crossover is where manual payroll goes wrong. Consider an employee earning $9,000 biweekly who has $180,000 in year-to-date wages heading into a mid-November payday. That paycheck would push cumulative wages to $189,000, which is $4,500 above the $184,500 cap. The employer owes 6.2% on only the first $4,500 of that check ($279), not on the full $9,000. Payroll software applies the cap automatically; anyone running payroll by hand has to track cumulative wages to avoid overpaying.
What Counts as Wages
Salaries, hourly pay, bonuses, commissions, and reported tips are all subject to the tax. Several benefits are excluded from FICA wages under federal rules: employer contributions to qualified health plans, health savings accounts, group-term life insurance up to $50,000 in coverage, dependent care assistance, educational assistance up to $5,250 per year, and on-site athletic facilities.6Internal Revenue Service. Employer’s Tax Guide to Fringe Benefits
Salary reductions through a Section 125 cafeteria plan also lower the FICA wage base. When an employee pays health premiums, dependent care, or HSA contributions on a pre-tax basis through a cafeteria plan, those amounts are generally excluded from FICA wages for both parties.7Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans A well-structured benefits package genuinely reduces the employer’s payroll tax bill, not just the employee’s.
Depositing and Reporting
Employers deposit Social Security tax, withheld income tax, and Medicare tax together through the Electronic Federal Tax Payment System, a free Treasury service.8U.S. Department of the Treasury. Electronic Federal Tax Payment System Payments must be scheduled by 8 p.m. Eastern the day before the due date to count as timely.
Deposit Schedules
Deposit frequency depends on the size of your total employment tax liability during a four-quarter lookback period (July 1 of the second preceding year through June 30 of the prior year). Report $50,000 or less in that window and you’re a monthly depositor. Report more and you’re on a semiweekly schedule.9Internal Revenue Service. Instructions for Form 941 Monthly depositors pay by the 15th of the month following payroll. Semiweekly depositors generally have three to four business days after each payday, depending on which weekday payroll falls on.
Reporting Forms
Most employers file Form 941 quarterly, due by the last day of the month after each quarter closes.10Internal Revenue Service. Employment Tax Due Dates Very small employers whose total annual liability for Social Security, Medicare, and withheld income tax is $1,000 or less may qualify to file Form 944 once a year instead.11Internal Revenue Service. About Form 944, Employer’s Annual Federal Tax Return Keep payroll records and tax documents for at least four years after the tax is due or paid, whichever is later.12Internal Revenue Service. Employment Tax Recordkeeping
Penalties and Personal Liability
Late deposit penalties escalate with the delay:
- 1 to 5 days late: 2% of the unpaid deposit
- 6 to 15 days late: 5%
- 16 or more days late: 10%
- After an IRS notice or demand for immediate payment: 15%
The percentage applies to the amount that should have been deposited, not the total payroll.13Internal Revenue Service. Failure to Deposit Penalty
The larger exposure is personal. Under the trust fund recovery penalty, any person responsible for collecting and paying over employment taxes who willfully fails to do so can be held personally liable for 100% of the unpaid tax.14Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax “Responsible person” typically includes owners, officers, and anyone with authority over company finances, and the corporate shield does not protect you. When cash flow tightens, paying other creditors before the IRS is one of the most expensive mistakes an employer can make.
Situations That Change the Rules
Household Employers
If you hire someone to work in your home and control what they do and how they do it, you’re a household employer. Common examples include nannies, housekeepers, and home health aides. Social Security and Medicare tax obligations only start once you pay a household worker $3,000 or more in cash wages during the calendar year.15Internal Revenue Service. Publication 926, Household Employer’s Tax Guide Above the threshold, you owe the 6.2% employer share and withhold the employee’s 6.2%. Report these on Schedule H attached to your personal Form 1040, not on quarterly Form 941.16Internal Revenue Service. Instructions for Schedule H Workers hired through an agency that controls how the work is done are generally the agency’s employees, so the agency handles FICA.
Statutory Employees
A narrow group of workers who might otherwise look like independent contractors are treated as employees for FICA purposes. The four categories are delivery drivers (beverages other than milk, baked goods, meat, produce, or laundry), full-time life insurance salespeople working primarily for one company, home-based workers producing goods from employer-supplied materials, and full-time traveling salespeople turning in orders on the employer’s behalf.17Internal Revenue Service. Statutory Employees Each worker also has to perform substantially all services personally, have no major investment in equipment, and work for the same payer on an ongoing basis. If all three conditions are met, you withhold and match FICA. Federal income tax withholding does not apply.
Self-Employed Individuals
If you’re a sole proprietor, independent contractor, or partner rather than an employer, there is no split. You pay 12.4% for Social Security on net self-employment earnings up to the same $184,500 wage base, plus 2.9% for Medicare, for a combined self-employment tax of 15.3%.18Office of the Law Revision Counsel. 26 USC 1401 – Rate of Tax The tax is calculated on 92.35% of net self-employment income, and half of the self-employment tax is deductible above the line on Form 1040.19Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
FICA Tip Credit for Food and Service Businesses
Restaurants, bars, and certain service businesses can recover some of the employer FICA tax paid on tips through the Section 45B credit. The credit covers the employer’s share of FICA on tips that exceed the amount needed to bring the employee’s wages up to $5.15 per hour, a reference figure the statute freezes at the federal minimum wage in effect on January 1, 2007.20Office of the Law Revision Counsel. 26 USC 45B – Credit for Portion of Employer Social Security Taxes Paid With Respect to Employee Cash Tips The credit also covers tips received in barbering, hair care, nail care, esthetics, and spa treatments. Only voluntary customer tips qualify; mandatory service charges do not. If you claim the credit, you have to reduce your payroll tax deduction by the same amount.