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Employee Tax Deducted from Pay

Excerpted from "Social Security Handbook". See the up-to-date, official Social Security Handbook at ssa.gov.

1406. Employee Tax Deducted from Pay

1406.1 When are Social Security and Medicare taxes deducted from wages?

Social Security and Medicare taxes are deducted when wages are paid. (See §1408 for special rules on cash and charged tips).

1406.2 Are taxes deducted if you do not meet the minimum dollar test?

If an employer is not sure if an employee will meet the minimum dollar test for household employees (as explained in §915), for agricultural employees (as explained in §901), or for some homeworkers (as explained in §830), the employer may:

  1. Deduct the tax when the payment is made; or

  2. Wait until the test is met.

1406.3 How are taxes deducted for tips?

If the employee submits written reports of tips more than once a month (§1408), the employer may collect the Social Security tax on tips even if the cash-pay test in §1408 is not yet met.

1406.4 If the employee does not meet the cash-pay test, what should the employer do?

If the employer collects the taxes and later finds that the employee does not meet the test, the employer must repay the Social Security taxes deducted to the employee. If the employer cannot locate the employee, the taxes should be sent to IRS.

Last Revised: Jul. 1, 2004

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