Do the math and be observant!

Written By: Glenn Michaels, Op-Ed Writer

Mortgage loan originators, loan openers, mortgage loan processors, mortgage loan underwriters, and quality control personnel need to take an extra few minutes when reviewing borrower’s paystubs, W – 2s and tax returns.

The payroll services that many employers utilize have been compromised, as their logos have been copied and reformatted too numerous to mention and there have been payroll statements found in loan files that were materially misrepresented.

Need FHA Training? CLICK HERE:

All wage earners have two things in common regardless of their location. They all have social security (FICA) and Medicare tax withholdings taken from each and every payroll check. The formulas for these withholdings are the same for everyone regardless of their location and income.

The withholding rates for the tax year 2013 are the following:

Social security (FICA) withholding is 6.20% up to $113,700 or $7,049.40;
Medicare is 1.45% of the annual wages with no limitation.
If a wage earner earns $200,000.00 or more their Medicare withholding will increase .9%

When reviewing a paystub do the math to determine if the social security withholding and Medicare withholding is correct. People are paid incrementally so due to rounding you could be off by pennies not dollars. Also when doing the calculation there are some pre-taxed deductions that will be deducted prior to determining the social security withholding.

If someone worked for one employer in 2013, the employer must stop withholding social security taxes whenever the wage income exceeds $113,700.00. So watch the cut off. A paystub that is issued where the year to date income exceeds $113,700.00 should no longer be withholding the social security tax. If the paystub is still withholding the social security tax and the income is over $113,700.00 then it is a strong likelihood that the paystub is not genuine.

When reviewing self – employed borrower’s tax returns are currently 12.4% up to $113,700.00 and 2.9% for Medicare regardless of income.

The withholding tax and maximum withholding income varies by year for social security but Medicare has been constant

Need FHA Training? CLICK HERE:

Below are some of the withholding rates and maximum withholding. When reviewing paystubs and W-2s you want make sure your payroll records are correct.

Social Security (FICA) and Medicare Yearly Limits are below:
Year Annual Base Wage Limit Tax Rate Max Social Security Withholding
2013 $113,700.00 6.20% $7,049.40
2012 $110,100.00 4.20% $4,624.20
2011 $106,800.00 4.20% $4,485.60
2010 $106,800.00 6.20% $6,621.60
2009 $106,800.00 6.20% $6,621.60
2008 $102,000.00 6.20% $6,324.00
Medicare is 1.45% regardless of income earned.

About The Author

Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.