Federal Insurance Contributions Act (FICA),
Definition of Federal Insurance Contributions Act (FICA):
A law that mandates payroll taxes, which help to fund security and Medicare benefits. Under FICA, the employer and the employee make equal contributions through their taxes. The employer pays taxes on payroll, while the workers pay taxes on their salaries or wages earned.
The Federal Insurance Contributions Act (FICA) is a U.S. law that mandates a payroll tax on the paychecks of employees, as well as contributions from employers, to fund the Social Security and Medicare programs. For self-employed persons, there is an equivalent law called the Self-Employed Contributions Act (SECA).
FICA contributions are mandatory, with rates set annually—although not necessarily changed annually. They remained stable between 2019 and 2020, for example. The amount of the FICA payment depends on the income of the employee: the higher the income, the higher the FICA payment.
How to use Federal Insurance Contributions Act (FICA) in a sentence?
- The amount of FICA tax withheld from your paycheck depends on your gross wages.
- Employers and employees both pay FICA taxes.
- You cannot opt out of paying FICA taxes. .
- FICA funds Social Security programs that include survivors, children and spouses, retirement, and disability benefits. .
- FICA is taken directly from an employee's gross pay. .
Meaning of Federal Insurance Contributions Act (FICA) & Federal Insurance Contributions Act (FICA) Definition