Learning Objective #1Identify, for social security purposes, thosepersons covered under the law and thoseservices that make up employment2
Coverage under FICAFederal Insurance Contributions Act of 1935Employee and Employer BOTH PAY:◦6.2% OASDI◦1.45% HI◦Employee ONLY pays additional Medicare tax of0.9% if wages exceed $200,000Self-Employment Contributions Act of 1951Employee pays (both EE and ER portions):◦(6.2% + 6.2%) =12.4% OASDI◦(1.45% + 1.45%) =2.9% HI◦Additional Medicare if wages exceed $200,0003
Coverage under FICAConsider:1.An employee or an independent contractor?2.Is service rendered considered employment?3.Is compensation considered taxable wages?4
#1 Employee or IndependentContractor?EmployeeCommon law requirementsSpecifically also covers the following as EE:◦Full-time life insurance salespersons◦Agent- and commission-drivers of food/beveragesor dry cleaning◦Full-time traveling salespersons◦Individual working at home on products thatemployer supplies and are returned to furnishedspecifications5
#1 Employee or IndependentContractor?Independent ContractorConduct an independent trade or businessIndependent contractor liable for his/her ownsocial security taxes on net earnings6Workers may be classified as independent contractors if they:1. Hire, supervise, and pay assistants.2. Determine the sequence of their work.3. Set their own hours of work.4. Work for as many employers as they wish.5. Are paid by the job.6. Make their services available to the public.7. Have an opportunity for profit or loss.8. Furnish their own tools.9. Have a substantial investment in their trade.10. May be dismissed only under terms of contract.
#2 EmploymentEmploymentapplies to any service performedby employees for their employers◦Regardless of the citizenship or residenceEmployerif“person employs 1+ individualsfor performance of services in U.S.”◦“Person” includes trusts, estates, individual,partnership or corporation”7