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.