Federal Insurance Contribution Act (FICA)

The Federal Insurance Contribution Act, known as FICA, includes the combined taxes collected to help fund Social Security and Medicare programs.

Created in 1935 to pay Social Security benefits to retirees, FICA now covers retirement benefits, disability benefits and benefits to workers’ survivors. Medicare, added in 1965, helps pay for medical coverage for people aged 65 and up.
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The Social Security program benefits retirees, disabled individuals under retirement age, spouses, former spouses, and, in some cases, dependent children. This is also called Old Age, Survivors and Disability Insurance tax, or OASDI tax.

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The Medicare tax allows employees to qualify for Part A Medicare coverage with no additional cost to obtain coverage through Parts B, C, and D when eligible.
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The FICA tax rate is a fixed percentage applied to all taxable compensation. This includes salary, wages, tips, bonuses, commissions, and taxable fringe benefits.  
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FICA taxes are mandatory payroll taxes that must be withheld and paid on behalf of each employee. It is up to the employer to calculate, withhold, deposit, and report FICA taxes. FICA taxes must be paid semi-weekly or monthly. Employers report FICA taxes on IRS Form 941.
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Employees and employers equally share the FICA tax.
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Employers are legally liable for any unpaid taxes. Employers who do not properly deduct payroll taxes from employee wages may be subject to interest, fines, and penalties, including civil monetary penalties, criminal prosecution, and even jail. If an employer fails to pay or report FICA taxes, the employer’s owner or officers can be held personally liable for the taxes.
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Learn more about FICA including tips on how to calculate FICA and answers to commonly asked questions.

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