Learning Objective #1Identify, for social securitypurposes, those persons coveredunder the law and those servicesthat make up employment2
Coverage under FICAFederal Insurance Contributions Act of1935Employee and Employer BOTH PAY:◦6.2% OASDI◦1.45% HI◦Employee ONLY pays additionalMedicare tax of 0.9% if wages exceed$200,000Self-Employment Contributions Act of1951Employee pays (both EE and ERportions):3
Coverage under FICAConsider:1.An employee or an independentcontractor?2.Is service rendered consideredemployment?3.Is compensation considered taxablewages?4
#1 Employee orIndependent Contractor?EmployeeCommon law requirementsSpecifically also covers the following asEE:◦Full-time life insurance salespersons◦Agent- and commission-drivers offood/beverages or dry cleaning◦Full-time traveling salespersons◦Individual working at home on productsthat employer supplies and are returnedto furnished specifications5
#1 Employee orIndependent Contractor?Independent ContractorConduct an independent trade orbusinessIndependent contractor liable forhis/her own social security taxes on netearnings6Workers 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 serviceperformed by employees for theiremployers◦Regardless of the citizenship orresidenceEmployerif“person employs 1+individuals for performance of servicesin U.S.”◦“Person” includes trusts, estates,individual, partnership orcorporation”7