Self‑employed individuals compute and pay their Social Security and Medicare tax using Schedule SE (1040) , Self Employment Tax as part of their individual tax return. Special rules apply to: • Tipped employees • People who have both wage income and self‑employment income • Certain non‑cash payments (“in‑kind” compensation), such as meals, lodging, clothing, or services provided by the employer FICA tax rates and wage base limits change over time based on federal law. The Social Security wage base typically changes each year, and the combined Social Security and Medicare tax rate is generally around 15.3 percent in total, split between the employer and employee (or fully paid by a self‑employed person). You should always check current IRS guidance for the latest wage base and rates rather than relying on a specific year’s dollar amount. For detailed and up‑to‑date information on FICA withholding, employer responsibilities, and self‑employment tax, see these IRS resources: • Publication 15, (Circular E) Employer’s Tax Guide • Publication 15-A, Employer’s Supplemental Tax Guide
INCOME TAX WITHHOLDING
INTRODUCTION Most employers must withhold three main taxes from employee wages: • Federal income tax • Minnesota income tax • The employee’s share of FICA (Social Security and Medicare)
The employer also pays an employer share of FICA. Withholding amounts are based on the employee’s wages and the information they give on their f ederal Form W‑4 and Minnesota Form W‑4MN . Employers must begin withholding as soon as wages are paid. Special rules apply to supplemental wages such as bonuses. The IRS and Minnesota Department of Revenue publish withholding tables and calculators on their websites and send updates when laws or procedures change; employers must follow the current guidance.
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