Are you confused about the social security contribution limits for 2013? Most of us are. Discover the answers here so that you can make informed decisions about your finances and take charge of your future.
Social Security Contribution Limit for 2013
Grasping Social Security Contribution and its effect on you? Check out the 2013 Social Security Contribution Limit! Knowing this limit can be a benefit – let’s look into two subsections. What is Social Security Contribution? And, what’s the Social Security Contribution Limit for 2013?
Image credits: retiregenz.com by Yuval Arnold
What is Social Security Contribution?
Social Security Contribution refers to the mandatory payment of funds into a government-administered retirement and disability fund. It is an important vehicle for workers to receive benefits in their retirement years or in case of disability. This contribution is also crucial to maintain the solvency of the Social Security system.
It is a percentage of an employee’s salary and is paid jointly by the employer and employee. The rate is set by law and can change each year. The funds collected are used to pay for current beneficiaries, as well as future ones. This ensures sustainability and stability of the program.
In 2013, there was a cap on how much income could be subject to Social Security taxes. The Social Security Contribution Limit was set at $113,700 for that year. It means that incomes above this amount were not subject to Social Security taxes.
To avoid missing out on potential social security benefits, it is important to stay informed about contribution rules and limits every year.
Who says money can’t buy happiness? For 2013, it can buy you a higher Social Security contribution limit.
Social Security Contribution Limit for 2013
The maximum amount of income subject to Social Security tax for the year 2013 was determined by the Social Security Administration. Below is a table that displays the contribution limits for employees and self-employed individuals:
|Type of Contributor||Maximum Earnings Subject to SS Tax|
It’s important to note that these contribution limits are adjusted annually based on changes in average wages. In 2013, this limit increased from the previous year’s maximum earnings subject to SS tax of $110,100. This limit applies only to the Old-Age, Survivors, and Disability Insurance (OASDI) portion of the tax, which is capped at 12.4% in total.
Employers need to ensure they withhold social security taxes from an employee’s wages until they reach this limit, while self-employed individuals are responsible for paying both employee and employer portions of the tax.
To avoid overpaying social security taxes or being caught off guard with unexpected payments at year-end, employers and self-employed individuals should track their earnings throughout the year and adjust withholding accordingly. Additionally, it’s helpful to consult with a financial advisor or tax professional regarding individualized planning strategies for minimizing social security taxes.
Finding out how the limit is determined is like trying to solve a Rubik’s Cube blindfolded – it’s confusing and hurts your brain.
How is the Limit Determined?
The Social Security Contribution Limit for 2013 is based on the national average wage index. This index is calculated by the Social Security Administration and determines the maximum amount of earnings subject to Social Security taxation. For 2013, the limit was set at $113,700.
To determine the limit, the SSA takes into consideration data from the previous year’s tax returns and adjusts it for inflation. The resulting figure becomes the maximum taxable wage base for that year. Any earnings above this limit are not subject to Social Security taxes.
It is important to note that while there is a limit on taxable wages, there is no limit on Social Security benefits. Workers who earn more than the taxable wage base can still receive benefits in retirement or disability as long as they meet other eligibility requirements.
According to Forbes, “The maximum amount of earnings subject to payroll tax will increase by $2,100 in 2020” which means that individuals earning up to $137,700 will be taxed at a rate of 12.4%.
Looks like Santa won’t be making any Social Security contributions this year, but the rest of us will have to deal with the limit.
Who is Affected by the Limit?
Individuals bound by the 2013 social security contribution limit must comply to contribute a specified amount from their income. The limit affects high-income earners who reach the earnings cap, self-employed individuals, and those receiving both wages and self-employment income.
These groups of people generally earn a higher amount of money than typical employees and therefore must contribute more towards social security. Failure to comply with the stated regulations may result in fines or penalties.
It is important to note that while some individuals are exempt from the social security tax, they still need to comply with other taxes related to Medicare and Medicaid. These taxes require separate compliance measures.
Do not miss out on contributing your fair share towards social security as this may affect your retirement benefits in the future. Proper compliance ensures access to necessary benefits upon retirement and safeguards against any potential risks or uncertainties.
Why break the Social Security contribution limit when you can break the law and get a free stay in jail?
What are the Consequences of Exceeding the Limit?
Going over the Social Security contribution limit in 2013 could result in some serious financial consequences. Breaching it may lead to overpayments of FICA taxes, where you would end up paying more than required. To add to this, any excess contributions generally do not attract tax benefits and can also cause complications when accounting for your annual earnings. It is crucial that individuals adhere to the limits set by law to avoid these problems.
If one erroneously exceeds the Social Security contribution limit, they may recoup some of the extra funds by filing a claim. That being said, it is essential to be cautious as claiming back surplus contributions can result in an arduous and time-consuming process with potential legal fees. It is best suggested to stay within the regulatory confines of Social Security contribution limits and manage input amounts accordingly.
It is important to understand that going over the entitlement cap could turn out to be financially detrimental and impact future social security benefits. Therefore, before making contributions beyond the set ceiling, it is advisable to consult with a tax professional or financial advisor who will help understand possible outcomes for your specific case.
According to Forbes.com, “The contribution limit overrides any cost-of-living adjustments that would otherwise increase this amount.” This means that despite whether there are changes made due to inflation or other factors each year, going beyond prescribed limitations remains unchanged under normal conditions.
Sorry, but exceeding the Social Security Contribution Limit for 2013 won’t earn you a starring role in Orange Is the New Black.
FAQs about What Is The Social Security Contribution Limit For 2013?
What is the social security contribution limit for 2013?
The social security contribution limit for 2013 is $113,700.
Is this limit applicable for all employees?
No, this limit is only applicable for employees who earn $113,700 or more in a year.
What happens if an employee earns more than the contribution limit?
If an employee earns more than the contribution limit, they will not have to pay any additional social security taxes on the excess earnings.
Is the contribution limit per job or per employee?
The contribution limit is per employee, regardless of the number of jobs they may have or the number of employers they work for.
Is this contribution limit different from the Medicare contribution limit?
Yes, the social security contribution limit is different from the Medicare contribution limit, which has no cap or limit.
Can employers contribute more than the social security contribution limit?
Employers are required to match any social security contributions made by their employees, but they are not allowed to contribute more than the contribution limit.