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FICA Tax: The Federal Insurance Contributions Act tax, which includes both Social Security and Medicare taxes.
FICA tax refers to the Federal Insurance Contributions Act tax, which is a payroll tax that includes both Social Security and Medicare taxes. The FICA tax is used to fund two major social insurance programs in the United States, Social Security and Medicare.
Social Security taxes are used to fund the Social Security program, which provides retirement, disability, and survivor benefits to eligible workers and their families. The Social Security tax is currently set at 6.2% of an employee's gross income, with both the employee and employer contributing an equal amount. Self-employed individuals are required to pay the entire 12.4% Social Security tax themselves.
Medicare taxes are used to fund the Medicare program, which provides health insurance to eligible workers who are over the age of 65, as well as certain individuals with disabilities and individuals with end-stage renal disease. The Medicare tax is currently set at 1.45% of an employee's gross income, with both the employee and employer contributing an equal amount. Self-employed individuals are required to pay the entire 2.9% Medicare tax themselves.
The FICA tax is an important source of revenue for the federal government and helps to ensure that Social Security and Medicare programs remain solvent and sustainable for future generations. Employers are responsible for withholding FICA taxes from their employees' paychecks and depositing them with the IRS. Failure to comply with FICA tax requirements can result in legal penalties and damage to an employer's reputation.
In conclusion, FICA tax is a payroll tax that includes both Social Security and Medicare taxes. The tax is used to fund two major social insurance programs in the United States, Social Security and Medicare. Employers are responsible for complying with FICA tax requirements and ensuring that they are accurately withholding and depositing taxes with the IRS. By doing so, employers can help to ensure that these important social insurance programs remain solvent and sustainable for future generations.
