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Maximum taxable earnings. Social Securitys Old-Age, Survivors, and Disability Insurance (OASDI) program and Medicares Hospital Insurance (HI) program are financed primarily by employment taxes. Tax rates are set by law (see sections 1401, 3101, and 3111 of the Internal Revenue Code) and apply to earnings up to a maximum amount for OASDI.
Second, the FICA tax helps fund Medicare, of which roughly five out of six eligible members are seniors aged 65 and up. The Medicare tax portion of FICA works out to 2.9%, but just as we saw with the payroll tax, the responsibility of the Medicare tax is split down the middle between you and your employer, 1.45% each.
Federal Insurance Contributions Act (FICA) The Federal Insurance Contributions Act (FICA) is United States federal law that imposes a tax on both employees and employers that goes toward the funding of Social Security and Medicare. Employers are required to withhold social security taxes from their employees and pay a matching amount of these taxes.
What is FICA? FICA is a U.S. federal payroll tax. It stands for the . Federal Insurance Contributions Act. and is deducted from each paycheck. Your nine-digit number helps Social Security accurately record your covered wages or self-employment. As you work and pay FICA taxes, you earn credits for Social Security benefits. How much is coming out of my check?
With the Social Security part of FICA, a 6.2% tax applies to earnings up to $132,900. Above that amount, you no longer have to pay any Social Security payroll tax. That works out to a maximum
Employers must deposit and report employment taxes.See the Employment Tax Due Dates page for specific forms and due dates.. At the end of the year, you must prepare and file Form W-2, Wage and Tax Statement to report wages, tips and other compensation paid to an employee. Use Form W-3, Transmittal of Wage and Tax Statements to transmit Forms W-2 to the Social Security Administration.
FICA tax is a combination of a 6.2% Social Security tax and a 1.45% Medicare tax the IRS imposes on employee earnings. For 2019, only the first $132,900 of earnings is subject to the Social