Quick Definition

The Federal Insurance Contributions Act (FICA) is a U.S. law that mandates a payroll tax on both employees and employers to fund Social Security and Medicare programs.

Examples

• 1An employee earning $50,000 annually will have a portion of their salary deducted for FICA taxes, contributing to their future Social Security and Medicare benefits.
• 2A small business owner calculates FICA taxes for their employees each payroll period to ensure proper contributions to federal programs.
• 3During tax season, individuals review their FICA contributions on their W-2 forms to understand how much was contributed towards Social Security and Medicare.

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