What is in this article?:
- Social Security: It pays to know all the provisions
- Responsible for entire amount
• The majority of farmers won’t have to take advantage of the disability or survivor portions of Social Security benefits, but all can profit from knowing exactly what the benefits are and considering them; along with other personal retirement resources, in planning for the future.
Many farmers think of Social Security strictly in terms of retirement, unaware of the benefits available in situations of accidental sudden death or a long-term medical disability.
The majority of farmers won’t have to take advantage of the disability or survivor portions of Social Security benefits, but all can profit from knowing exactly what the benefits are and considering them; along with other personal retirement resources, in planning for the future.
Your Social Security contributions basically consist of Federal Insurance Contributions Act (FICA) taxes, which earners pay the government in exchange for financial assistance in retirement and disability, survivor and Medicare benefits.
Most full-time farmers are self-employed and would pay FICA taxes amounting to 13.3 percent of their earnings. Of that 13.3 percent, the Social Security portion is 10.4 percent. The remaining 2.9 percent is for Medicare.
The Social Security portion is paid on earnings up to $110,100 for 2012. There is no limit on the Medicare portion. Due to legislation passed late last year the 10.4 percent rate is only good through February 2012. Of course new legislation could change or extend the rate. If there are no legislative changes then it reverts back to 12.4 percent
If you’re a farm employee and receive a W-2 form each year, you pay 5.65 percent of your salary in FICA taxes through February, 2012. Your employer contributes 7.65 percent up to the maximum earnings limit of $110,100 in 2012.
If you earn more than $110,100 in 2012, you still pay Medicare taxes of 1.45 percent on all your earnings. But you don’t pay the 5.65 percent portion on any earnings beyond $110,100. Remember, however, the maximum earnings limit goes up each year. Also the 5.65 percent rate is only good through February 2012 unless legislation extends or changes it.
If you’re considered contract labor and receive a 1099 at the end of the year, or if you’re self-employed as are most farmers, then you must pay the entire amount yourself. That amounts to 13.3 percent of your net self-employment income up to the $110,100 earnings limit through February, 2012.
You also pay 2.90 percent (1.45 percent x 2) for Medicare on all earnings over the limit. Again this is subject to change if legislation extends or modifies the current rates. If no new legislation is enacted then the rate reverts to 15.3 percent starting in March.