FICA tax refers to the Federal Insurance Contributions Act tax, which is a payroll tax imposed on both employees and employers in the United States. It is used to fund Social Security and Medicare programs. The tax is calculated based on a percentage of an employee’s wages, with a maximum limit on the amount of wages subject to the tax. The funds collected from FICA tax are used to provide benefits to retired individuals, disabled individuals, and those who qualify for Medicare.
Answer: FICA tax stands for Federal Insurance Contributions Act tax. It is a payroll tax that is deducted from employees’ wages to fund Social Security and Medicare programs.
Answer: Both employees and employers are responsible for paying FICA tax. Employees have their share deducted from their wages, while employers contribute an equal amount on behalf of their employees.
Answer: Yes, self-employed individuals are required to pay both the employee and employer portions of FICA tax. This is commonly referred to as self-employment tax.
Answer: FICA tax is not typically refundable. However, if an employee has excess FICA tax withheld due to working for multiple employers, they may be eligible for a refund when filing their annual tax return.
Answer: Certain categories of workers, such as certain religious group members or nonresident aliens, may be exempt from paying FICA tax. However, specific criteria must be met to qualify for these exemptions.
Answer: FICA tax rates can be subject to change by the government. It is important to stay updated with the latest tax laws and rates to ensure compliance.
Answer: No, FICA tax is not withheld from non-employee compensation, such as payments made to independent contractors. Instead, self-employed individuals are responsible for paying self-employment tax on their net earnings.
Answer: FICA tax is not deductible on individual income tax returns. However, self-employed individuals can deduct the employer portion of FICA tax as a business expense.
Answer: Employers who fail to withhold or pay FICA tax may face penalties and interest charges. The IRS has the authority to assess these penalties and take legal action to collect the unpaid taxes.
This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.
This glossary post was last updated: 13th April 2024.
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