FICA (Federal Insurance Contributions Act)
Definition
A mandatory federal payroll tax that funds Social Security and Medicare.
What is FICA?
FICA requires employers to withhold specific taxes from employee wages and contribute a matching amount. As of 2025, the rates are:
- 6.2% Social Security tax (up to the wage base limit)
- 1.45% Medicare tax (no income cap; additional .9% tax applied to employee portion on wages exceeding $200,000)
Why is FICA Important for Employers?
Required by federal law
- Improper calculations can result in IRS penalties
- Affects employee eligibility for Social Security and Medicare
- Critical for year-end tax reporting and employer compliance
FAQs
What does FICA fund?
FICA taxes fund Social Security and Medicare programs for retirees, disabled individuals, and eligible dependents.
How much is withheld for FICA?
In 2025, employees and employers each contribute 6.2% for Social Security and 1.45% for Medicare (additional .9% tax applied to employee portion on wages exceeding $200,000).
Who is exempt from FICA?
Some student workers, certain nonresident aliens, and specific religious groups may be exempt, depending on circumstances.
How ExtensisHR Can Help
Our payroll specialists:
- Accurately calculate and withhold FICA taxes
- Ensure timely, compliant tax filings with the IRS
- Track wage base limits and legislative adjustments
- Manage multistate payroll tax compliance and audit readiness