A retiree is collecting social security benefits.

In the United States, there is no age-based exemption from payroll taxes, even for individuals who are already collecting Social Security retirement benefits. Any person performing services as a common-law employee is subject to federal tax withholding regardless of their retirement status. Therefore, the employer is legally required to withhold Federal Income Tax (FIT) based on the employee ' s Form W-4 selections. Additionally, both components of the Federal Insurance Contributions Act (FICA)—Social Security tax (6.2%) and Medicare tax (1.45%)—must be withheld from the employee ' s wages. For Social Security, withholding continues until the employee’s year-to-date earnings reach the annual wage base cap. Furthermore, because the salary is $200,000, the payroll department must be prepared to withhold the 0.9% Additional Medicare Tax once the employee exceeds the $200,000 threshold later in the year.