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FICA taxes are withholdings mandated by the Federal Insurance Contribution Act. FICA withholdings are contributions to the Social Security and Medicare systems, which provide financial support and medical coverage after retirement or in the event of a disability.
Social Security Contributions
Social security contributions are part of the federal program which provide financial support for those who qualify upon retirement. Most retired workers will qualify if they have contributed to social security during their entire working life.
Medicare Contributions
Medicare contributions support the federal medical insurance program for senior citizens and some disabled citizens who are otherwise uninsured.
Calculation
Social security taxes are withheld at a rate of 6.2% of taxable income. Medicare withholding is 1.45% of taxable income.
Employer Contribution
Employers are required to match social security and Medicare withholdings. Self-employed individuals are required to pay both the employee and employer portions of the withholding.
W2 Reporting
FICA tax withholdings are reported on an employee's W2, and must be reported on an annual tax return.
Source:
Social Security Administration
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