Social Security Taxes

Anyone earning wages or self-employment income from U.S. work or employment is potentially subject to U.S. social security taxes. This includes nonresidents and residents alike. The U.S. social security system is made up of two components, the OASDI (old age, survivors and disability insurance) tax and the Medicare tax. These taxes are imposed on both the employer and the employee. Self-employed individuals pay both portions (employer and employee) of their social tax burden. OASDI is levied on annual wages up to $87,900 (for 2004) and is collected from the employee through withholding. The employee and employer each pay a 6.2% tax to social security on qualifying wages. The medicare tax is also collected through withholding and is levied at a rate 1.45% of qualifying wages on both the employer and employee. However, unlike OASDI, there is no ceiling on the total annual wages subject to this tax. Both taxes combined are often referred to as FICA and frequently show up on your wage statements under that heading.

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