FICA

Meaning & Definition

FICA is a payroll tax in the U.S., which provides funding for Social Security, Medicare, and other programs and services. The tax is deducted from employee wages with an equal amount contributed by employers, who also pay this tax. FICA taxes result in retirement benefits and insurance for people aged 65 or older, as well as disability insurance.

Important Features of FICA

• Contributes to social security and medicare benefits.
• Paid contribution between the employer and employee.
• Directly affects the amount of money an employee receives after taxes.
• Required for payroll tax compliance in the U.S.
• Provides long-term financial stability to the workforce.
• Significant to HR and payroll operations worldwide.

Legal & Regulatory Considerations

FICA compliance is required by employers under U.S. payroll tax laws:

• Administered and governed by the IRS in the U.S. under the Federal Insurance Contributions Act (FICA).
• Includes contributions to the Social Security and Medicare taxes.
• Employers are required to withhold and match their employee contributions.
• Not covered under the income tax legislation of India.