A federal law imposing a payroll tax to assist in funding Social Security benefits.
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2006, the employee's FICA tax rate is 7.65% on the first $94,200 of an employee's salary or wages and then 1.45% (the Medicare tax) on any salary or wages in excess of $94,200. The employer must match the employee's FICA tax, so that the combined employee and employer tax is 15.30% on each's employee's first $94,200 of annual wages and then 2.90% on any salary or wages in excess of $94,200. To learn more, see Explanation of Payroll Accounting. To Top
Social security taxes (for both old-age, survivors and disability insurance-OASDI-and Medicare).
FICA is the federal law that requires employers to withhold wages from employee paychecks and deposit that money in designated government accounts. These accounts, or trust funds, provide a variety of benefits to US citizens through a program commonly known as Social Security. Retirement income is the largest benefit that FICA withholding supports, but it also funds disability and unemployment insurance. FICA takes 6.2% of every paycheck you receive, up to an annual cap ($84,900 for 2002) set by Congress. Your employer is required to contribute an equal amount. If you're self-employed, you pay as both employer and employee, or 12.4%. An additional 1.45% of your salary is also withheld, and matched by your employer, to pay for Medicare, a medical trust fund for people over 65. There's no salary cap for this part of your contribution.