You’ve probably heard the term “FICA” in relationship to your taxes, but you may not know exactly what it means. We’ve put together a brief summary to help you better understand this tax term.
FICA is an acronym for the Federal Insurance Contributions Act. This law covers Social Security and Medicare. In practical usage, FICA typically refers to the withholdings employees pay as their contributions to Social Security and Medicare insurance. Your employer will pay a matching amount to make up your total contribution to these programs.
Self-employed individuals do not pay FICA. Instead they pay self-employment tax to cover both their own contributions to Social Security and Medicare as well as the “employer” portion of the contributions.
If you’re curious about how much you’re paying in FICA contributions, just take a look at your most recent pay stub. It should show both Social Security and Medicare as separate line items, so you can clearly see how much you paid into these programs during your last pay period as well as a year-to-date amount.
Have questions about FICA or other tax issues? Just call Taxation Solutions, Inc. and we’ll be happy to help!