Global HR Glossary

Federal Insurance Contributions Act Tax (FICA Tax)?

The Federal Insurance Contributions Act (FICA) tax is a federal payroll tax that funds Social Security and Medicare, which provide benefits for retirees, the disabled, and children. Both employees and employers are required to contribute to this tax. 

Responsibilities and impact of FICA tax 

Key components include:

• Social Security Tax: Charged at 6.2% on income up to an annual limit.
• Medicare Tax: Applied at 1.45% on all earnings, with an additional 0.9% surtax on high-income earners.
• Employer Obligations: Employers must match the contributions made by employees and ensure proper reporting to the IRS. 

Understanding FICA tax obligations is essential for both employers and employees to ensure compliance and the correct funding of vital social programs.