What are social security and medicare taxes

No, but they are closely connected. FICA, the Federal Insurance Contributions Act, refers to the taxes that largely fund Social Security retirement, disability, survivor, spousal and children’s benefits. FICA taxes also provide a chunk of Medicare’s budget. 

Most workers have FICA taxes withheld directly from their paychecks. These deductions claim 6.2 percent of an employee’s gross pay for Social Security, up to an income threshold commonly termed “maximum taxable earnings.” In 2022, the threshold is $147,000; any earnings above that are not subject to Social Security taxes. The limit is adjusted annually based on national changes in wage levels. 

There is no comparable earnings maximum for Medicare; the 1.45 percent Medicare tax included in FICA is levied on all of your work income. Employers match workers’ Social Security and Medicare contributions.

The Social Security tax is one of two taxes all employers are required to withhold under the Federal Insurance Contributions Act (FICA). The other is the Medicare Tax. FICA also mandates an Additional Medicare tax, though only for employees earning more than a set dollar amount.

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

The Social Security tax is a percentage of gross wages that most employees, employers and self-employed workers must pay to fund the federal program. Certain groups of taxpayers are exempt from paying social security tax. It is the employer’s obligation to withhold the correct amount of Social Security tax from every paycheck and forward it to the federal government on time. Failure to do so can result in significant penalties.

Only the social security tax has a wage base limit. The wage base limit is the maximum wage that's subject to the tax for that year. Refer to "What's New" in Publication 15 for the current wage limit for social security wages.

Employers should record the name and social security number (SSN) of each employee as they’re shown on the employee’s social security card.  If the employee's name is incorrect as shown on the card (i.e. because of marriage or divorce), the employee should request an updated card from the SSA. You should continue to report the employee's wages under the old name until the employee shows you the updated social security card with the corrected name.

The Federal Insurance Contributions Act (FICA) mandates that U.S. resident taxpayers must fund (in the form of a federal payroll tax) the following programs:

• Social Security- old-age, survivors, and disability insurance taxes
• Medicare- hospital insurance taxes

Together these taxes total nearly 8% of yearly earned income and are usually deducted or withheld automatically by the employer based on the employee's tax residency status and other information.

Nonresident federal tax filers are exempt from these taxes. If you are a nonresident tax filer and these taxes were withheld from your paycheck in error, you will need to request a refund. See the section below for more information.

If you are not sure about your tax residency status, please see our section on determining this status.

Who Can File For A Refund?

In addition to nonresident federal tax filers, you are also not subject to Social Security or Medicare tax withholding on your wages if:

• you have on-campus employment, or
• you are authorized for Curricular Practical Training (CPT) or Optional Practical Training (OPT), or
• you are authorized for employment due to Economic Hardship

If these taxes were withheld from your paycheck in error, you will need to request a refund. See the section below for more information.

How to Request a Refund

If your employer has withheld Social Security or Medicare taxes in error, follow these steps:

1. Request a refund from your employer.
   

   You must first request a refund of these taxes from your employer. If your employer is able to refund these taxes, no further action is necessary. For Yale-earned income, contact the Yale international Tax Office.

2. If necessary, request a statement from your employer.
   

   If your employer is unable to refund these taxes, request a statement outlining their denial of your refund and file Forms 843 and 8316.

3. If necessary, request a refund from the IRS.
   

   If you are unable to receive a refund of these taxes from your employer, you may then file Form 843 and 8316 to request a refund from the IRS. Make sure to include the following:

   • a completed 843 form (see IRS instructions)
   • a completed 8316 form
   • a copy of your W-2(s) that indicates the Social Security tax that was withheld in error
   • a copy of the current visa page of your passport
   • a copy of your I-94 record
   • if applicable, a copy of your I-20 form that indicates CPT or OPT authorization
   • if applicable, a copy of your EAD card authorizing OPT or Economic Hardship
   • a written statement that you unsuccessfully requested a refund of these taxes from your employer (this can be the statement that you obtained from your employer, or your own statement that you were denied refund of these taxes and were unable to obtain a statement from them)
4. Submit your forms to the IRS.
   

   Print, sign and date form and mail these documents to Internal Revenue Service, Austin, TX 73301-0215. Do not include these documents with your federal income tax return.

5. Keep copies!
   

   Remember to keep copies of what you file each year (in case your return gets reviewed and there is a problem or if the IRS audits you in the future).