What is FICA?
Federal Insurance Contributions Act—the payroll tax funding Social Security (6.2%) and Medicare (1.45%) for employees and employers.
Definition
FICA (Federal Insurance Contributions Act) is the payroll tax that funds Social Security and Medicare. The combined rate is 7.65% for employees (6.2% Social Security on the first $168,600 in 2024, plus 1.45% Medicare on all wages) with an equal employer match. An additional 0.9% Medicare surtax applies to wages over $200,000. Self-employed individuals pay both portions (15.3%) as self-employment tax. For expats, FICA may or may not apply depending on employer type and Totalization Agreements.
Who Needs to Know This?
All US employees and employers, plus self-employed individuals. Expats working for US employers abroad or self-employed abroad must understand FICA implications.
Key Deadline
Withheld from each paycheck; self-employed pay with quarterly estimates and annual return
Potential Penalties
Employers face penalties for failure to withhold and remit FICA; employees may owe back taxes
Related Forms
Common Mistakes to Avoid
- 1Not understanding that self-employed pay both employee and employer shares
- 2Expats not checking if FICA applies to their foreign employment
- 3Missing the additional 0.9% Medicare surtax on high wages
- 4Not claiming the Social Security wage base limit
Related Terms
Harsh Agarwal, EA · IRS Enrolled Agent
Reviewed for accuracy by Zenith Financial Advisors
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