How+to+Calculate+FICA+Tax

= How to Calculate FICA Tax = By Robert Bennett, last updated December 22, 2011 //Source:// [] FICA (Federal Insurance Contribution Act) is composed of two parts, Social Security and Medicare, and is deducted from an employee’s paycheck. All employers are mandated by Federal law to withhold FICA from an employee’s payroll check. FICA was instituted in the Social Security Act of 1935 and is used to fund Medicare, Social Security, Social Security Disability and Social Security Survivors Benefits. The FICA withholdings determine your Social Security payments when you retire.

 The Social Security portion of FICA is calculated as 6.2% of the employees earned income and the Medicare portion is calculated at 1.45% of the employees earned income. Together they total 7.65% of the total wages. There is a maximum wage limit of $106,800. All income over the maximum wage limit is not subject to FICA withholding. Your employer cannot keep this tax. The FICA tax removed from an employee’s paycheck is required to be passed on to the federal government along with an additional 7.65% from the company. For example, if an employee earns $1000.00 on a paycheck, $62.00 will be withheld for Social Security and $14.50 will be withheld for Medicare. The employer will pay the federal government a total of $153.00 for FICA ($76.50 from the employee and $76.50 from the employer). If a person is self-employed, then the self-employed person will pay both portions of the withholding (15.3%) to the federal government. In 2011, in an effort to provide employees with more income due to the depressed economy, the government reduced the employee’s portion of the Social Security tax from 6.2% to 4.2%. The employer still pays the full 6.2% tax rate. Payroll for 2012 will revert back to the full 6.2% tax for all employees. Students enrolled in school and are employed at a school, college or university are exempt from paying FICA taxes. For the majority of employees, FICA taxes are not refundable when filing a Federal Income Tax return. In very few cases, if an employee earned more than $106,800 and an employer overpaid FICA taxes, then the employee can receive a credit for the overpayment. This is filed on line 69 of IRS form 1040.

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