SR 97-05 Dated 01/97

STATE OF NEW HAMPSHIRE

INTER-DEPARTMENT COMMUNICATION

SUMMARY

This SR releases the 1997 withholding rates for FICA (Social Security) and FIT (Federal Income Tax), and the FICA income ceiling. The FICA and FIT withholding rates apply to self-employed income and the adult category employment expense disregard.

POLICY

FICA (Social Security)

 The FICA withholding rate for both employees and employers remains 7.65%. This subdivides into 6.20% for the Social Security share and 1.45% for Medicare’s portion.

 Self-employed individuals pay a FICA withholding rate of 15.3%. These individuals may deduct from income tax one half of the 15.3% paid for the year as a business expense. The actual rate becomes 7.65% after the deduction is taken. This has not changed since last year.

 The income ceiling subject to the full FICA withholding rate increased from $62,700 for 1996 to $65,400 for 1997. There is no ceiling to the amount of gross earned income from which Medicare may be withheld. For employees and employers, the Medicare portion of the FICA rate is 1.45%; for a self-employed individual, the rate is 2.9%. These percentages have not changed in recent years.

 The maximum amount that an individual 65 or over can earn without affecting Social Security benefits increased to $13,500 for 1997. For those under age 65, the new earnings limit is $8,640 for 1997. Individuals age 70 and over are not subject to an earnings limit.

FIT (Federal Income Tax)

District Offices use IRS Circular E to determine the applicable federal income tax withholding rate. Although the federal withholding rate has not changed this year, the ceiling on the maximum amount has increased January 1, 1997 making the 1996 Circular E obsolete. Copies of the new IRS Circular E, dated January 1997, will be sent to each District Office under separate cover as soon as they are received from the IRS.

Hourly Minimum Wage

The federal hourly minimum wage rate remains at $4.75 an hour, which was set when Congress passed an increase from $4.25 effective October 1, 1996. This wage rate is used to determine work registration and student exemption status in the food stamp program. A correction to this amount in FAM Chapter 200 is included with the release of this SR.

POSTING INSTRUCTIONS

DISPOSITION

This SR may be destroyed after its contents have been noted and its posting instructions carried out.

DISTRIBUTION

This SR only will be distributed according to the narrative distribution list for the Family Assistance and Adult Assistance Manuals. The SR with manual pages will be distributed to all holders of the FAM and AAM.

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