FICA: What Is the Federal Insurance Contributions Act – Marca English
FICA is directly linked with SSA programs
FICA stands for Federal Insurance Contributions Act, and it’s part of the US federal payroll tax.
FICA associates with Social Security programs. Your nine-digit number helps Social Security accurately record your covered wages or self-employment.
Working and paying FICA taxes helps you earn credits for Social Security benefits.
Social Security covers almost 180 million people in the United States. Around 6.2% of your gross wages goes to Social Security tax, and 1.45% of your salary ends in Medicare tax.
However, you are not the only one paying for Medicare or Social Security. The employer matches the average to 15.3% in every wage you obtain.
FICA doesn’t only benefit people under Social Security and Medicare programs, which provide benefits for retirees, the disabled, and children. They benefit you.
If you are 30 or 40 years old, your FICA contributions will help your retirement in the future.
The money you pay in taxes is not held in a personal account for you to use when you get benefits.
Today’s workers help pay for current retirees and added benefits. Any unused money goes to the Social Security trust funds to help secure your future.
According to the Self-Employment Contributions Act passed in 1954, self-employed contribute to Social Security and Medicare with taxes on net earnings.
Investopedia said there are two ways for calculating FICA. Here’s one example:
“An employee earning $50,000 will pay $3,825 in FICA contributions in 2022. That breaks down as $3,100 in Social Security tax and $725 in Medicare tax. The wage earner’s employer would pay the same amount.”
Social Security tax = $50,000 x .062 (the employee rate of 6.2%) = $3,100
Medicare tax = $50,000 x .0145 (the employee rate of 1.45%) = $725
Total FICA = $3,825 ($3,100 + $725)
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