Each year, the Internal Revenue Service determines whether or not the limit on Social Security taxable wages will increase.
The Social Security Administration determines this annually by calculating the national average wage index. In 2017, SSA will increase the taxable wage base from $118,500 to $127,200 for both employee and employer.
What does this mean to employers? In 2016, an employer paid $7,347.00 for each employee that reached the wage cap and 2017, employers will pay $7,886.40, an increase of $539.40 per employee.
Employees at the wage cap will also see an additional $539.40 deducted from their checks. It is important to note that employees potentially affected by this change should be notified in advance of the effective date of Jan. 1, 2017.
More information online:
- For a look back at the increases over the years and for more about the contribution and benefit base visit the Social Security website at ssa.gov/OACT/COLA/cbb.html .
- For a history of the taxable maximum, the rationale for the changes and how the SSA arrived at today’s process, visit www.ssa.gov/policy/docs/policybriefs/pb2011-02.html
If you have questions about how your employees are impacted by Social Security deductions, contact the experts at BCN Services for assistance.
Amber Heckaman, Senior Staff Accountant