It’s a common scenario: You’ve carved a subsidiary out of your main operation, so now you officially are the owner of two business entities. But that means you could be overpaying Social Security taxes if some of the employees work for both companies.
Strategy: Assign a “common paymaster” to handle payroll matters. If you pay the “shared employees” from a single source, you won’t overpay Social Security tax any longer.
What’s more, employees come out ahead, too (see below).
Here’s the whole story: Each employer and employee must each pay half of the 12.4% Social Security tax and the 2.9% Medicare tax on wages. For 2014, the employer’s half of the Social Security tax is 6.2% on each employee’s wages up to $117,000 (up from $113,700 in 2013). Any amount above the Social Security wage ceiling is still subject to the Medicare tax, and the employer’s half of that tax is 1.45%. Thus, the employer’s share of the Social Security a...(register to read more)