In short
Federal Insurance Contributions Act (FICA) taxes fund Social Security and Medicare. Employers and employees each pay 6.2% Social Security tax on wages up to an annual wage base and 1.45% Medicare tax on all wages.
Key takeaways
- Employees pay an additional 0.9% Medicare tax on wages over $200,000; employers withhold it but don't match it.
- The employer's share is deductible; the employee's share is not.
- Self-employed people pay both halves through self-employment tax.
Where it's tested
REG: Employee Benefits & Payroll Tax — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
Which statement correctly describes the Social Security and Medicare components of FICA?