What is OASDI Tax and Why Do I Have to Pay It?

227 viewsBusiness
0

The OASDI tax is known as the Social Security tax. Social Security benefits are paid to retired or disabled employees and to surviving family members in the event of the employee's death. OASDI tax income is put into a trust fund. The Social Security Administration then uses the trust funds to provide benefits.
Description
The acronym OASDI stands for Old Age, Rescue and Disability Insurance. OASDI refers to taxes allowed under the Federal Insurance Contributions Act, or FICA. A large number of employees must pay OASDI taxes, usually through payroll deductions. Those who are not asked to pay typically work for state governments or similar employers who have created alternative retirement plans. Employers of covered employees also pay Social Security taxes in excess of the wages they pay. Medicare taxes are not part of the OASDI tax, although they are sometimes charged along with Social Security, and both employers and employees also pay Medicare taxes.
Good
About 96 percent of employers and their employees must pay OASDI taxes. In return, all employees who pay Social Security for 10 years are entitled to retirement benefits. Another function of the OASDI tax is to provide disability insurance. The Social Security Administration says a 20 -year -old man has about a 30 percent chance of having a disability at some point. Social Security pays disability benefits to people who have been unable to work for a year or more. Finally, safe benefits help take care of your family in case you die. Secure benefits can be paid to a spouse, child or dependent parent.
OASDI Tax Rates
The OASDI tax is a fixed percentage. Employees typically pay 6.2 percent of their gross salary up to a periodically adjusted annual limit. For example, in 2011 an employee paid OASDI taxes on the first $ 106,800 earned. The employer pays the same amount. These rates sometimes vary. For example, in 2011 Congress reduced the employee contribution rate to 4.2 percent; although employers continue to pay in full 6.2 percent.
Self-employed
If you are self -employed, you must pay OASDI taxes. However, since you do not have an employer to pay part of the tax, you are responsible for the whole. This means the self -employed individual should pay 12.4 percent of his or her net income to $ 106,800, although this was also reduced for 2011 to 10.4 percent. Self -employed individuals are also fully liable for Medicare taxes, bringing the combined rate to 15.3 percent (13.3 percent in 2011).

The Old Age Security, Survivor and Disability Program, or OASDI tax is calculated by taking a set percentage of your income from each paycheck. More commonly called the Social Security tax, this percentage is determined by law each year and applies to both employees and employers. For 2017, both employees and employers must contribute 6.2% of employee compensation, for a total of 12.4%. Those who are self-employed are responsible for the full 12.4%.

– Social Security Social Security 999 The Social Security program provides benefits for retirees and people who are unable to work due to illness or disability. Especially for those on low incomes, Jamsostek often provides the only consistent source of income for people who can no longer work.Since Social Security is a government program that aims to provide a safety net for working citizens, it is funded through a simple withholding tax that deducts a percentage of prepaid income from each paycheck. Workers who make contributions of at least 10 years are entitled to collect benefits based on their earnings history once they retire or become disabled.

Asked question