What is FICA taxes?
1.5k views |
Last modified 6/4/2020 3:09:40 AM EST |
Added by 123PayStubs Team
FICA acronymed as "Federal Insurance Contributions Act", is the money that is usually taken from the employee's paycheck to pay Medicare benefits and older Americans their Social Security retirement. FICA taxes are in addition to the federal, state, and local withholdings that the employees pay. These taxes are considered to be a mandatory type of deduction and is paid both by the employer and the employee.
Some employees can be exempt staff, which means that they can elect to not pay federal and state taxes. But, FICA taxes will still be taken from exempt employees’ paychecks.
Employers must withhold a certain percentage of the amount toward Social Security and Medicare taxes from employees' wages. The percentage is:
- 6.2 percent Social Security tax
- 1.45 percent Medicare tax
A matching amount is also collected from employers. In addition to the above two, employers must pay a 0.9 percent Medicare surtax when the employee earns over $200,000.