ACNT 1329_Chapter 3 - ACCT 1329 PAYROLL ACCOUNTING CHAPTER...

ACCT 1329
PAYROLL ACCOUNTING
CHAPTER 3
Social Security Taxes
1

Learning Objective #1
Identify, for social security
purposes, those persons covered
under the law and those services
that make up employment
2

Coverage under FICA
Federal Insurance Contributions Act of
1935

Employee and Employer BOTH PAY:
◦
6.2% OASDI
◦
1.45% HI
◦
Employee ONLY pays additional
Medicare tax of 0.9% if wages exceed
$200,000
Self-Employment Contributions Act of
1951

Employee pays (both EE and ER
portions):
3

Coverage under FICA
Consider:
1. An employee or an independent
contractor?
2. Is service rendered considered
employment?
3. Is compensation considered taxable
wages?
4

#1 Employee or
Independent Contractor?
Employee

Common law requirements

Specifically also covers the following as
EE:
◦
Full-time life insurance salespersons
◦
Agent- and commission-drivers of
food/beverages or dry cleaning
◦
Full-time traveling salespersons
◦
Individual working at home on products
that employer supplies and are returned
to furnished specifications
5

#1 Employee or
Independent Contractor?
Independent Contractor

Conduct an independent trade or
business

Independent contractor liable for
his/her own social security taxes on net
earnings
6
Workers 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 Employment

Employment applies to any service
performed by employees for their
employers
◦
Regardless of the citizenship or
residence

Employer if “person employs 1+
individuals for performance of services
in U.S.”
◦
“Person” includes trusts, estates,
individual, partnership or
corporation”
7