He didn’t want the financial benefits for their retirement, disability, Suspense Account or death to depend on federal revenue. He feared that politicians would take and use the money for their own purposes. So for each $1,000 in gross pay, the total FICA remittance (employee share + employer match) would be $153.00. So, when you or your employees pay FICA taxes, you’re not just losing part of a paycheck.

The History of FICA

When you see FICA on your paycheck, it indicates your contributions to these important social safety nets. There is no separate “refund” process like W-2 employees, but if you overpaid, you can adjust it on your annual return. In such cases, the IRS allows reimbursement or improvement, but the process varies depending on the type of employment and visa status. However, you’re allowed to deduct the “employer” half when filing taxes. To solve this issue, President Lyndon B. Johnson signed Medicare into federal law in 1965.

#2 – Self-Employed Individuals

• Remember, these taxes are not used to pay for your future benefits.
• Like the Social Security tax, both employers and employees are required to pay this tax.
• Employees do not pay additional Medicare tax beyond 1.45%, whereas self-employed individuals must pay an extra 0.9% on net earnings above specific thresholds.3.
• Before joining NerdWallet, Sheri was on the business and metro copy desks at the Los Angeles Times, where she worked on stories that won the 1998 Pulitzer Prize for breaking news.
• The Social Security Act of 1935 was written specifically to provide payments to those aged 65 and older, as well as widows with dependent children and those with disabilities, rendering them unable to work.
• You must be at least 18 years of age to become a Retirable Premium user.

As of 2024, the FICA tax rate is 6.2% for Social Security and 1.45% for Medicare, applied to employee wages. Employers match these contributions, resulting in a total FICA tax rate of 15.3%. The Self-Employment Contributions Act (SECA) of 1954 was also passed into law and levies taxes on the income of taxpayers who work for themselves.

Key Components of FICA

• In addition to the FICA taxes, there is an Additional Medicare Tax (AMT) that applies to individuals who earn above a certain threshold.
• Overpayment usually occurs when there has been a miscalculation in your FICA taxes.
• Because no tax is owed on wages above the wage base limit amount, the total tax rate declines as wages increase beyond that limit.
• Some people are “exempt workers,” which means they elect not to have federal income tax withheld from their paychecks.
• While the deductions may seem small, they add up over time and play a crucial role in retirement and medical coverage.

It originally funded Social Security to help income statement retirees, survivors, and those with disabilities. Medicare was added in 1965 under President Johnson, expanding FICA to include health insurance for the elderly. Individuals who belong to religions that oppose insurance are exempt from this requirement, provided that both the employer and the employee follow the same religion to qualify for the exemption. Sheri Gordon is a former assigning editor on the Core Personal Finance team at NerdWallet and has edited financial content for more than 20 years. Before joining NerdWallet, Sheri was on the business and metro copy desks at the Los Angeles Times, where she worked on stories that won the 1998 Pulitzer Prize for breaking news. Sheri has edited publications on arts, culture, food, education and activism.

• The primary objective of this act was to fund the Social Security and Medicare programs.
• All wage earners contribute a 6.2% payroll tax for Social Security with a 6.2% employer match.
• They can deduct half of their contributions as a business expense to offset this additional burden.
• These contributions ensure you and future generations have access to retirement and healthcare benefits.
• Many people see “FICA” on their paychecks and wonder what it means.
• FICA’s historical journey demonstrates its significant role in the United States, and it’s not something to overlook when contemplating the intricacies of payroll tax and social security benefits.
• The Federal Insurance Contributions Act, or FICA, requires that wage earners contribute a portion of their earnings to fund the Social Security and Medicare programs.

Find Social Security Taxes

Knowing exactly what amount you’re fica meaning responsible for is important to remain in good standing with the IRS. Failing to pay your payroll taxes can result in serious consequences and back taxes later on. Our Community  Tax experts can help both employees and employers understand and properly file their employment taxes, so contact a representative for more information. Both employees and employers are responsible for contributing to FICA taxes. As you can see from the taxes listed above, employees and employers are responsible for paying the same amount in Social Security and Medicare taxes.