TN 2 (07-02)

RM 01310.025 How We Derive Aggregate Estimated Social Security Taxes for the Social Security Statement

A. Introduction

This section explains how the Statement system uses the Federal Insurance Contributions Act (FICA) and Self-Employment Contributions Act (SECA) tax rates to derive the estimated aggregate Social Security tax contribution amount shown at the bottom of page 3 on the Social Security Statement.

B. Policy

Self-employment income (SEI) and agricultural employment are not applicable in years prior to 1951. MQGE earnings cannot be used to derive Social Security (Retirement, Survivors and Disability Insurance, or RSDI) taxes. Statement system computes the tax on earnings up to the maximum taxable amount posted to the MEF for each given year. The final computed tax amount must be rounded down to the nearest dollar.

EXAMPLE: If the final computed RSDI tax amount is $496.96, then the amount that will be displayed on the Statement will be $496. (No cents are displayed on the Statement).

Because railroad earnings are FICA earnings, taxes on these earnings since 1973 are calculated at the FICA rate. Prior to 1973, the tax rate for railroad earnings was actually different than the FICA rate, but the Statement 2001 system cannot determine the correct rate; therefore, taxes for railroad earnings will not be computed or displayed until 1973.

Statement 2001 totals the yearly tax amounts for an aggregate tax amount and displays this total on the statement. It also computes and displays an aggregate total for the corresponding taxes paid by the SSN holder's employers on the posted wages.

C. Kinds of Tax Tables

1. FICA RSDI Tax Table

The system uses this table to determine the appropriate FICA tax rate for RSDI:

YEAR

FICA RSDI TAX RATE

1937 through 1950

.01

1951 through 1953

.015

1954 through 1956

.02

1957 through 1958

.0225

1959

.025

1960 through 1961

.03

1962

.03125

1963 through 1965

.03625

1966

.0385

1967

.039

1968

.038

1969 through 1970

.042

1971 through 1972

.046

1973

.0485

1974 through 1977

.0495

1978

.0505

1979 through 1980

.0508

1981

.0535

1982 through 1984

.054

1985 through 1987

.057

1988 through 1989

.0606

1990 and after

.062

2. SECA RSDI Tax Table for RSDI

The system uses this table to determine the appropriate SECA tax rate.

YEAR

SECA RSDI TAX RATE

1937 through 1952

Not Applicable

1953

.0225

1954 through 1956

.03

1957 through 1958

.03375

1959

.0375

1960 through 1961

.045

1962

.047

1963 through 1965

.054

1966

.058

1967

.059

1968

.058

1969 through 1970

.063

1971 through 1972

.069

1973 through 1977

.070

1978

.071

1979 through 1980

.0705

1981

.08

1982 through 1983

.0805

1984

.087

1985

.091

1986 through 1987

.094

1988 through 1989

.1012

1990 and after

.124

D. Process — RSDI Tax Rate

The system uses the following rules to determine how the applicable RSDI tax rate is to be applied:

When the MEF Indicates...

Then the System Uses the Applicable RSDI Tax Rate...

Earnings for years 1951 and/or 1952

FICA

Only FICA earnings posted for the year

FICA

Only SECA earnings posted for the year

SECA

Both FICA and SECA earnings posted for the year

FICA

Combinations of FICA, SECA and MQGE earnings are posted for a year

The FICA tax rate or SECA tax rate must be applied only to the FICA/SECA earnings according to the rules indicated above. The MQGE earnings will not be considered.

E. Process — Estimated RSDI Tax

The system determines the estimated RSDI tax as follows:

When the Tax Year Is...

Then the System...

1937 - 1950

  • Applies the applicable FICA RSDI tax rate to the total amount of earnings in this period as follows:

    37-50 Earnings X 37-50 FICA RSDI Tax Rate = 37-50 Estimated RSDI Tax

1951 and 1952

  • Applies the applicable FICA RSDI tax rate to the earnings in each year as follows:

    195(Y) Earnings X 195(Y) FICA RSDI Tax Rate = 195(Y) Estimated RSDI Tax

1953 - 1977

  • Determines the type of earnings posted to the record. (See RM 01310.025F.)

  • Applies the applicable FICA RSDI tax rate to the years in which FICA earnings have been determined, as follows:

  • CCYY FICA Earnings X CCYY FICA RSDI Tax Rate = CCYY Estimated RSDI Tax

  • Applies the applicable SECA RSDI tax rate to the years in which SECA earnings have been determined, as follows:

    CCYY SECA Earnings X CCYY SECA RSDI Tax Rate = CCYY Estimated RSDI Tax

1978 to date

  • Determines the type of earnings posted to the record. (See RM 01310.025F.)

  • Applies the applicable FICA RSDI tax rate to the years in which FICA earnings have been determined, as follows:

    CCYY FICA Earnings X CCYY FICA RSDI Tax Rate = CCYY Estimated RSDI Tax

  • Applies the applicable SECA RSDI tax rate to the years in which SECA earnings have been determined, as follows:

    CCYY SECA Earnings X CCYY SECA RSDI Tax Rate - CCYY Estimated RSDI Tax

F. Process — Treatment of Posted Earnings

1. 1953-1977

This is how the system determines the type of earnings posted for years 1953 through 1977:

When the QC Pattern for the year is...

And the self- employment
indicator is...

Then, all earnings posted for the year are treated as...

SSSS, SSSN, SSNN, SNNN,
SSSR, SSRR, SRRR

1-4 or Z

SECA Earnings

CCCC, CCCN, CCNN,
CNNN

0-4 or Z

FICA Earnings

NNNN, NNNR, NNRR,
NRRR, RRRR

(N/A)

(N/A)

Any other combination

(N/A)

FICA Earnings

2. Years 1978 to Date

This is how the system determines the type of earnings posted for years 1978 to date:

When the Self-Employment Indicator on the MEF is...<