Fica sentence example
- With the receipt of each paycheck or when calculating their yearly taxes, many individuals wonder what "FICA" actually means.
- Although not called so at the time, this tax is what is known today as FICA.
- Its provisions did not change, but it was renamed the Federal Income Contributions Act (FICA).
- Through FICA, the IRS gathers the money for the benefits program, which it then gives to the SSA to distribute to individuals approved to receive funds.
- Every employed individual in the U.S. is required to pay FICA taxes on their income, regardless of whether they work for someone else or are self-employed.Advertisement
- However, employers are also required to pay FICA taxes for each of their employees.
- Because employers and employees must both contribute, FICA is therefore more akin to a contribution program, despite technically being regarded as a tax.
- For 2011, the FICA tax rate was a total 12.4 percent of net earned income, with 6.2 being payable by the employee and 6.2 payable by the employer.
- This means that an individual earning more than $106,800 only pays 6.2 percent FICA taxes on $106,800, but not on any additional earnings.
- Usually, employers automatically deduct an employee's portion of FICA taxes from their paycheck and remit them to the IRS.Advertisement
- However, the IRS holds an employee responsible for their FICA taxes.
- Therefore, an employee may be held responsible for their employer's failure to pay FICA, and should always consult their paycheck to ensure that the proper taxes have been withheld.
- Self-employed individuals, freelancers and independent contractors must pay FICA taxes before the yearly tax payment deadline set by the IRS, which falls on or around April 15th.
- However, to avoid paying them late, these individuals should pay FICA on at least a quarterly basis.
- The amount of owed FICA taxes is based on their expected annual income.Advertisement
- Failure to pay or the underpayment of FICA may subject employers and workers to fines and other penalties.
- Overpayment of FICA entitles the individual or company to a refund of the amount overpaid.
- To avoid a penalty, ensure that you satisfy your FICA obligations each year.