FICA
FICA is the Federal Insurance Contributions Act, the federal law that funds Social Security and Medicare through payroll taxes split between employer and employee. Each pay period, an employer withholds 6.2% of wages for Social Security up to the annual wage base, plus 1.45% for Medicare, then matches both amounts and remits the total to the IRS.
What FICA pays for
Social Security and Medicare are the two programs FICA funds. The Social Security portion, 6.2% each from employer and employee, funds retirement, disability, and survivor benefits, and only applies up to an annual wage base the Social Security Administration sets each year, so high earners stop paying it partway through the year. The Medicare portion, 1.45% each with no wage base cap, funds hospital insurance for people 65 and older and some younger people with disabilities. Employees earning above set thresholds also owe an extra 0.9% Additional Medicare Tax, which the employer withholds but does not match. Self-employed workers pay both the employer and employee shares themselves under a related law, SECA.
Who pays FICA
FICA applies to wages paid by virtually any employer, with a short list of exceptions: some student workers at their own school, certain religious-group members who’ve filed for an exemption, and a few categories of nonresident visa holders. Independent contractors don’t have FICA withheld from their pay at all; instead they pay the equivalent self-employment tax directly to the IRS when they file. Because FICA is split evenly between employer and employee, correctly classifying a worker as an employee versus a contractor determines who owes it and how it gets paid, which is why classification mistakes carry real tax exposure for a business.
Every FICA deposit and filing runs on tight IRS deadlines that are easy to miss when payroll is handled by hand. WageTime files every federal, state, and local tax automatically, including deposits, so FICA withholding and remittance happen without a manual filing calendar to track.
See how WageTime handles tax filingFrequently asked
Is FICA the same as federal income tax?
No. Federal income tax funds general government spending and its withholding amount depends on the employee’s W-4 elections; FICA is a fixed-percentage tax that funds only Social Security and Medicare, withheld at the same rate for every worker regardless of their W-4.
Does FICA apply to bonuses and commissions?
Yes. FICA applies to nearly all forms of taxable wages, including bonuses, commissions, and overtime pay, not just regular salary or hourly wages.