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What Is FICA Tax and How Does it Work? Buy Side from WSJ

exempt from paying

FICA taxes do not apply to payments received by students employed by a school, college, or university where the student is pursuing a course of study. An examination of the student’s primary relationship with Vanderbilt University will be made in order to determine if employment or education is predominant in the relationship. Most recently she was a senior contributor at Forbes covering the intersection of money and technology before joining Donna has carved out a name for herself in the finance and small business markets, writing hundreds of business articles offering advice, insightful analysis, and groundbreaking coverage.

tax returns

In this article, we’ll discuss what FICA taxes are, how they’re applied and who’s responsible for paying them. Each quarter, employers are required to send a quarterly payroll tax return, Form 941, to the IRS. On this form, the employer reconciles the amounts deducted from employee paychecks and the amount owed by the employer with the deposits made for that quarter. Form 941 is due on the last day of the month in the month following the end of the calendar quarter. For example, the first quarter payroll tax filing, which covers wages paid in January, February, and March, is due on April 30.

Forms & Instructions

What Is Fica Tax tax is a payroll tax imposed by the federal government that funds Social Security and Medicare programs. NerdWallet strives to keep its information accurate and up to date. This information may be different than what you see when you visit a financial institution, service provider or specific product’s site. All financial products, shopping products and services are presented without warranty. When evaluating offers, please review the financial institution’s Terms and Conditions. If you find discrepancies with your credit score or information from your credit report, please contact TransUnion® directly.

Is FICA tax the same as Social Security?

FICA tax includes two contributions: the Social Security tax and Medicare tax. The FICA tax rate is 7.65%, and is paid equally by employee and employer, for a total of 15.3%. Of that, 6.2% is for the Social Security tax and 1.45% is for the Medicare tax.

Certain employers were also eligible to claim a payroll tax credit for employees whom they continued to pay but who were not working due to the pandemic. An employee earning $250,000 and filing singly will pay $13,282.40 in FICA contributions in 2023. That breaks down to $9,932.40 in Social Security tax and $3,350 in Medicare tax.

Managing FICA tax responsibilities

Individuals’ FICA contributions pay current benefits and build future ones that will be owed to them. Get our latest business advice delivered directly to your inbox. Sage Intacct Advanced financial management platform for professionals with a growing business.

Who pays a FICA tax?

What is FICA tax? FICA, short for Federal Insurance Contributions Act, is a federal law that requires employers to withhold and remit a certain percent of an employee's earnings to help fund Social Security and Medicare. The total bill is split between the employer and employee, with each party paying half.

They’ll also each pay 2.9% of total wages toward Medicare since there’s no cap on the wages subject to the Medicare portion of FICA. The FICA tax is one of several payroll taxes employers need to withhold and pay to the IRS. Employers are required to withhold1.45% of each employee’s taxable wages to cover it. Unlike the Social Security Tax, there is no maximum wage base limit for the Medicare Tax. As an employer, you are required to withhold6.2%of each employee’s taxable gross wages to cover this tax, up to a maximum wage base limit. Employers also have to pay this tax by matching each employee’s contribution dollar-for-dollar, up to the same maximum wage base limit.

Do self-employed individuals pay FICA taxes?

Thus, for monthly filing, your FICA taxes are due to the IRS by the 15th of the month following payroll. The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Let an expert do your taxes for you, start to finish with TurboTax Live Full Service. Or you can get your taxes done right, with experts by your side with TurboTax Live Assisted.

  • FICA taxes fund Medicare and Social Security benefits in the US.
  • Employers must withhold both the employees’ share of FICA taxes as well as the employer’s portion.
  • If an employee is a U.S. citizen, then the employee must typically pay self-employment tax on earnings from work performed in the United States.
  • As for federal, state and local income taxes, the amount your employer withholds will usually depend upon the information you provided when filling out your W-4 Form or a similar state or local form.

It is the employer’s obligation to withhold the correct amount of Social Security tax from every paycheck and forward it to the federal government on time. For example, college students are exempt from paying FICA taxes on the wages they earn from an on-campus job. Exemptions also apply to some nonresident aliens, including foreign government employees and teachers. Certain religious groups may apply for an exemption from FICA taxes by filing IRS Form 4029.

See how we help organizations like yours with a wider range of payroll and HR options than any other provider. Outside of increases due to inflation, FICA taxes don’t change much, which means small business owners can set it and forget it. Small business owners are required to collect, report and remit FICA taxes to the IRS. If they don’t, the business owner may face penalties and fines. FICA and Social Security aren’t synonymous, but they are related. FICA includes the combined taxes withheld for Social Security and Medicare.


Wages and self-employment income above this threshold aren’t subject to Social Security tax. Employers must pay FICA taxes, but they withhold half of the amount due from employee paychecks and pay the remainder out of their own pocket. The company then sends both the employer and employee portion to the IRS on either a semi-weekly or monthly basis, depending on the average size of the company’s FICA tax deposits for the past year.

What is FICA tax? Understanding FICA for Small Business

That employee would have taxes withheld from two different employers. Can the employee ask you to stop withholding Social Security tax once he or she reaches the wage base threshold? Each employer must withhold Social Security taxes from the individual’s wages, even if the combined withholding exceeds the maximum amount that can be imposed for the year. Fortunately, the employee will get a credit on his or her tax return for any excess withheld.

  • When you’re old enough, FICA funds collected from those still in the workforce will pay your benefits.
  • In the 1930s, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability, or congenital disability).
  • The payment due date is one month after the end of each quarter.
  • This is known as the Additional Medicare tax, and while employers are responsible for withholding and remitting payments, they don’t have to make a matching payment.
  • Learn more about payroll taxes and how to calculate FICA taxes with Paychex.

Explore our full range of payroll and HR services, products, integrations and apps for businesses of all sizes and industries. A review of your status is performed at the beginning of each semester. “Are members of religious groups exempt from paying Social Security taxes?” Social Security Administration.

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