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FICA and Payroll Taxes Through the Year
Payroll tax under the Federal Insurance Contributions Act, called FICA, supports Social Security and Medicare, and the IRS collects it. For owners who plan year-round it drives S corporation pay and deposit timing. Our checklist, the Spigot-and-Bucket Payroll Pass, comes below. The statute is 26 U.S.C. 3101 to 3128; the IRS employer guide is Publication 15.
The short version
- Both the employee and the employer owe 6.2 percent for Social Security on wages up to the wage base, and 1.45 percent for Medicare on every dollar of wages.
- The wage base for 2026 is $184,500; the Social Security Administration has announced $192,300 for 2027.
- Employers withhold an extra 0.9 percent once one employee's wages pass $200,000, with no employer match.
Who it covers
| Group | Covered? | Note |
|---|---|---|
| Employer with employees | Usually | No minimum headcount; some exceptions exist |
| Working S corporation owner | Yes, on wages | The IRS can recast distributions as wages |
| Sole proprietor, partner, LLC member taxed as such | Not employees | They pay both halves as self-employment tax, usually once net earnings reach $400 |
The numbers
| Item | Amount | Year |
|---|---|---|
| Social Security wage base | $184,500 | 2026 |
| Rate, each side: Social Security; Medicare (no cap) | 6.2 percent; 1.45 percent | 2026 |
| Additional Medicare withholding | 0.9 percent over $200,000 | 2026 |
Source: Social Security Administration and IRS Publication 15
The Spigot-and-Bucket Payroll Pass
- Sort each worker as employee, owner on payroll or contractor.
- Withhold the employee share and set up the employer match.
- Look up the deposit schedule from the lookback period.
- Deposit first, then file Form 941; line 16 or Schedule B shows taxes owed, not deposits made.
- Keep employment tax records at least 4 years.
What it means for year-round planners
- S corporation wages carry FICA and distributions generally do not, yet the IRS expects reasonable pay; see S corporation owner pay.
- Deposit dates run apart from return dates; the compliance calendar can hold both.
- Payroll is where entity choice shows up in cash: choosing a structure.
Mistakes people make
- Filing the return and assuming deposits are done.
- Paying other creditors first while payroll taxes wait; the IRS treats that as a sign of willfulness.
- Believing the new tip and overtime deductions remove FICA; they cut income tax only.
A trust fund penalty proposed against an owner personally, or a criminal contact about payroll taxes, is a moment to ask an attorney.
Common questions
What is the Social Security wage base for 2026?
$184,500. The Social Security Administration's notice in the Federal Register, published October 26, 2026, sets $192,300 for wages paid in 2027.
Do S corporation owners pay FICA on distributions?
Wages carry FICA; distributions are generally outside employment tax. The IRS can treat pay for services labeled a distribution as wages.
Does the employer match the extra 0.9 percent Medicare tax?
No. The employer withholds it from wages over $200,000. The employee's final tax uses $250,000 for joint returns, $125,000 for separate returns and $200,000 otherwise.