What is FICA?
FICA is also known as Social Security tax. It is composed of OASDI ( Old Age, Survivors and Disability Benefits) and Medicare. The OASDI rate is 6.20% of a base amount that changes each year due to a rise in the Consumer Price Index. The wage base for FICA for the year 2006 is $94,200. The Medicare rate is 1.45% and currently has no income limit. All employees are subject to both FICA taxes. Generally, students are exempt from FICA tax if they meet the IRS requirements for student exemption.
FICA is the acronym for the Federal Insurance Contributions Act. This act mandates that an employer withhold a set percentage of an employee’s salary each pay period. FICA also requires that the employer match the employee’s amount and contribute the money to a government account known as the Social Security Trust Fund. This fund provides retirement income, as well as disability insurance, Medicare, and benefits for survivors. FICA was the result of the Social Security Act of 1935, proposed by President Franklin D. Roosevelt. The program began collecting taxes and paying benefits in 1937. In 1939, FICA was amended to include widows and orphans of working spouses, as well as elderly people who had not paid into the system. Originally, Social Security benefits were only available to people who were under 65 and who worked in what was considered commerce and industry. Government employees, medical personnel, lawyers, and agricultural workers were all exempt from FICA, and because they wer
FICA stands for Federal Insurance Contribution (tax) Act. You and your employer both contribute a percentage of your income to this tax which is attributed to Social Security and Medicare. Social security is the governmental fund that provides income to retirees, disability, etc. Medicare provides medical insurance coverage to persons over age 65.
The Federal Insurance Contribution Act, or FICA, is the federal law that tells your employer to withhold Social Security and Medicare taxes from your salary and other compensation. That s why you see a FICA entry on your pay stub, and a deduction for FICA taxes withheld. You can go to the Social Security Web site for a brief history of Social Security.
