Who Pay FICA Tax and Why?
FICA tax is paid by both employees and employers in the United States.
1. Employees pay FICA tax as part of their contribution to Social Security and Medicare, which are federal programs providing benefits like retirement income, disability income, and health insurance for older and some disabled Americans. The deduction from their paycheck is automatic and goes directly towards funding these programs.
2. Employers are also required to contribute to FICA for each of their employees. This is part of the employer’s responsibility to help fund the social safety net that Social Security and Medicare provide. The employer’s contribution matches the amount deducted from the employee’s wages, effectively doubling the contribution to these programs.
Self Employed Contribution Act (SECA): Self-employed individuals pay both the employee and employer portions of the FICA tax, covering their contributions to Social Security and Medicare.
What is FICA Tax & How it Works : Rates & Exemptions
FICA stands for Federal Insurance Contributions Act, which is a U.S. federal payroll tax that funds Social Security and Medicare programs. FICA taxes are withheld from employees’ paychecks and are also contributed by employers. The tax consists of two components, Social Security Tax and Medicare Tax. Social Security gives money to retired people, disabled individuals, and some widows and widowers. Medicare is a program that helps older people and some disabled people pay for their medical needs.
Geeky Takeaways:
- The FICA tax, integral to the U.S. tax system, ensures funding for Social Security and Medicare programs.
- Social Security benefits include retirement income, support for the disabled, and assistance to surviving spouses and children of deceased workers.
- Medicare provides health insurance to people aged 65 and older and some younger individuals with disabilities.
Table of Content
- How do FICA Taxes Work?
- Who Pay FICA Tax and Why?
- How are FICA Taxes Calculated?
- Wage Base Limits of FICA Tax
- FICA Tax Exemptions
- Do Non-US Citizens have to pay FICA Taxes?
- Conclusion
- FICA Tax – FAQs