What Is the Federal Insurance Contributions Act (FICA)?
The Federal Insurance Contributions Act (FICA) is a U.S. law establishing payroll taxes to fund the Social Security and Medicare programs. Taxes under the Federal Insurance Contributions Act (FICA) are composed of the old-age, survivors, and disability insurance taxes, also known as social security taxes, and the hospital insurance tax, also known as Medicare taxes. Different rates apply for these taxes The taxes are calculated as a percentage of the employee’s subject wages. FICA mandates employers to withhold the correct dollar amount from every paycheck and forward it to the government. Failure to comply can result in significant penalties.