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Old 12-21-11, 09:21 PM   #1
apclassic9
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Explain the 2% FICA thing to me?

OK, I work for myself, so I never bothered to check this out - was it a 2% cut to the employee, or 1% to the employee, and 1% to the employer?

All day today I've heard this $40 per paycheck number bandied about... which would mean $2000 paychecks? Or $1000 paychecks? And, is that average income levels? Is that for a weekly paycheck, or 2 weeks? What ARE they talking about??
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Old 12-21-11, 10:10 PM   #2
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me no know... me unemployed.
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Old 12-21-11, 11:16 PM   #3
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I don't have a clue. Not really concerned either
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Old 12-22-11, 03:04 AM   #4
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My limited understanding is that the taxes are pretty much split 50/50 with employer/employee(assuming W-2), so if a 1% cut earned $40 more, my guess is it's based on a roughly $4000-4500 paycheck(I do not know the other tax percentages off the top of my head).
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Old 12-22-11, 07:46 AM   #5
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^^ That's what I was thinking, although I was also thinking that "good Morning America"'s contention yesterday that this was average might be a bit off? A bit misleading?

Being self-employed, all I know is that it's ONLY 13.3% off the top of my earnings... instead of 15.3%!
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Old 12-22-11, 08:24 AM   #6
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In other words, much ado about nothing.

Think, the soccer player feigning a kneecap when he trips over something...
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Old 12-22-11, 09:23 AM   #7
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"An extension of the payroll tax cut will save a "typical" family earning $50,000 around $40 a paycheck, the White House says"

NOW I understand - the "typical" family works for the Federal Government, and gets paid monthly!
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Old 12-22-11, 09:40 AM   #8
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Glad we cleared that one up.

Any other questions?
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Old 12-22-11, 09:49 AM   #9
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Originally Posted by apclassic9 View Post
"An extension of the payroll tax cut will save a "typical" family earning $50,000 around $40 a paycheck, the White House says"

NOW I understand - the "typical" family works for the Federal Government, and gets paid monthly!
How do you gather that from your quote?
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Old 12-22-11, 11:52 AM   #10
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The vast majority of workers being paid on a monthly basis are government workers, the average federal salary is @$50,000, AND, since the only payroll that's expanding lately belongs to "we the people", AND since the White House thinks the private sector is fine.... is anybody else out there? Does the "typical" worker in Denver take home enough to have a 1% tax deduction equal $40 on a weekly or biweekly basis?
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Old 12-22-11, 12:21 PM   #11
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Quote:
Originally Posted by apclassic9 View Post
The vast majority of workers being paid on a monthly basis are government workers, the average federal salary is @$50,000, AND, since the only payroll that's expanding lately belongs to "we the people", AND since the White House thinks the private sector is fine.... is anybody else out there? Does the "typical" worker in Denver take home enough to have a 1% tax deduction equal $40 on a weekly or biweekly basis?
Median household income in the US is roughly $50k. Many non-government workers get paid monthly, in fact, I do. This will "save" me $40 per paycheck.
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Old 12-22-11, 01:23 PM   #12
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For the tax year 2011, the maximum fica wages is 106,800 a year. If you earn more than that, there is no fica tax.

The employee portion is 4.2% x 106,800 = 4,485.60. The employer portion is 6.2% x 106,800 = 6,621.60.

The difference between the two is 2,136.00. In other words, the fica in the years prior to 2011 was an even 6.2% for both employees and employers.

If you take that savings to the employee of 2,136.00 and figure that on a weekly basis using the average of 52 weeks in a year, you get about $41.00. This assumes you get paid for vacation days and sick days.
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Old 12-22-11, 03:48 PM   #13
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OK, so back to original question - the 2% is ONLY deductd from the employee? How was THAT supposed to stimulate jobs? In any case, I think that our fearless leader is overstating the importance of $40 per paycheck - if it's only once per month, how does that "cut out pizza night" or make families choose between the water bill & insulin (just 2 examples out of the White House)... and what did these folks do in 2010? Do people who make 106,800 per year really have such hardships? And, how does $40/week for someone making over $100K have any impact on the White House's stated "typical" family income of $50K? That would be $40/paycheck, but only $10 per week.

I'm just having a problem with the politics of the whole thing.... why not just SAY 1% or 2% - whatever it is? Do they think Americans can't multiply?
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Old 12-22-11, 04:07 PM   #14
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Citizens for Tax justice analyses page

Would any of these help?

http://ctj.org/ctjreports/archives.html

# 2011.12.07: Corporate Tax Dodging in the Fifty States, 2008-2010
# 2011.11.30: State-by-State Figures on Proposed 3.25 Percent Surcharge on Millionaires
# 2011.11.30: A More Effective Alternative to the Democrats' Payroll Tax Cut
# 2011.11.18: State-by-State Estate Tax Figures Show that President's Plan Is Too Generous to Millionaires
# 2011.11.03: Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010
# 2011.10.19: How to Implement the Buffett Rule
# 2011.10.19: Fact Sheet: Why Congress Should Reject A "Territorial" System and a "Repatriation" Amnesty
# 2011.10.18: Remembering the Tax Reform Act of 1986
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Old 12-22-11, 04:11 PM   #15
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Good point, if they simply allowed all income to be subjected to FICA, Social Security would be solvent way past 2025 (or whenever it is that its supposed to start showing a deficit.)

Because wealth is becoming more and more concentrated, more and more wealth is becoming exempt from being withheld because its going to rich people who tend to be very good at lowering their tax bills.

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Originally Posted by Garfield Cat View Post
For the tax year 2011, the maximum fica wages is 106,800 a year. If you earn more than that, there is no fica tax.

The employee portion is 4.2% x 106,800 = 4,485.60. The employer portion is 6.2% x 106,800 = 6,621.60.

The difference between the two is 2,136.00. In other words, the fica in the years prior to 2011 was an even 6.2% for both employees and employers.

If you take that savings to the employee of 2,136.00 and figure that on a weekly basis using the average of 52 weeks in a year, you get about $41.00. This assumes you get paid for vacation days and sick days.
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Old 12-23-11, 10:25 AM   #16
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Quote:
Originally Posted by apclassic9 View Post
OK, so back to original question - the 2% is ONLY deductd from the employee? How was THAT supposed to stimulate jobs? In any case, I think that our fearless leader is overstating the importance of $40 per paycheck - if it's only once per month, how does that "cut out pizza night" or make families choose between the water bill & insulin (just 2 examples out of the White House)... and what did these folks do in 2010? Do people who make 106,800 per year really have such hardships? And, how does $40/week for someone making over $100K have any impact on the White House's stated "typical" family income of $50K? That would be $40/paycheck, but only $10 per week.

I'm just having a problem with the politics of the whole thing.... why not just SAY 1% or 2% - whatever it is? Do they think Americans can't multiply?
I'll try to answer. In the years prior to 2011, the employee FICA percentage was 6.2% and for 2011 and 2012, its 4.2%. That's a 2% decrease for the employee. There is no decrease for the employer in 2011 nor for 2012.

It may not stimulate jobs but it will provide some nominal benefit to the employee.

The upper limit of 106,800 is per employee but some households have 2 wage earners, like husband and wife, or what's called "registered domestic partner". The assumption is that each would have a slight increase in take-home pay and that they share in the upkeep of the household budget. The other thing about husband & wife could be that each makes 53,400 in wages which total up to 106,800. Some households have that kind of profile.
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Old 12-23-11, 11:00 AM   #17
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Quote:
Originally Posted by apclassic9 View Post
OK, so back to original question - the 2% is ONLY deductd from the employee? How was THAT supposed to stimulate jobs? In any case, I think that our fearless leader is overstating the importance of $40 per paycheck - if it's only once per month, how does that "cut out pizza night" or make families choose between the water bill & insulin (just 2 examples out of the White House)... and what did these folks do in 2010? Do people who make 106,800 per year really have such hardships? And, how does $40/week for someone making over $100K have any impact on the White House's stated "typical" family income of $50K? That would be $40/paycheck, but only $10 per week.

I'm just having a problem with the politics of the whole thing.... why not just SAY 1% or 2% - whatever it is? Do they think Americans can't multiply?
There are many families in this geo area making close to or 6 figures and living close to the bone. Add to tht they are trying to keep kids in college, support elders, etc. That $2K a year might help them and it'll get put it back in the economy and may translate into some jobs saved if not added. Personally, I like to see some of our flagship corporations actually pay taxes on profits, that would be a refreshing change.
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Old 12-23-11, 04:51 PM   #18
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Where do you get this "monthly" pay, when the original statement was "pay period". Working the math out for a person earning $50,000 and saving $40 per payperiod, it calculates to 25 pay periods per year. 50,000 x 4.2%=2100 where previously was 50,000 x 6.2% = 3100 for a net reduction of $1000. $1000 / $40 = 25 payperiods in the year.

Now, you work for yourself and never checked it out. Isn't self employment income subject to the full FICA - both individual and employer portions (4.2% + 6.2%) and the actions saves you 6.2% + 6.2% that it would hae reverted to?
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Old 12-24-11, 07:48 AM   #19
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Yes, but the self-employed, like everyone else, also pays that little medicare tax - so the total Federal payroll tax is 13.3% this year, as opposed to 15.3% in years prior... and since the self-employed actually send $$ in, I'm sure we're all hollering "WHOOPIE!" about a 2 month extension. How to figure that one out as half a reporting period? January will probably be a really really busy month so we can all save 2% on FICA?
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Old 12-24-11, 10:01 AM   #20
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Normally, self employed individuals pay their taxes on a quarterly schedule. This gives them time to calculate the figures for income taxes and self employment taxes. Their taxes are calculated on a net profit basis. For the first 3 months of the year, they have till April 15 to pay the estimated taxes. Then for the first 5 months, they recalculate their net profit and estimated taxes for the next due date of June 15. Then again for the first 8 months, and pay by Sept 15. Finally, the full 12 months and pay by Jan 15 of the following year.

If they were consistent self employed individuals for several years, they would also benefit but not expressed on a pay period way. But the benefit is still there.
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