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The Social Security and Medicare programs are supported by a government payroll tax known as the Federal Insurance Contributions Act (FICA). FICA mandates that companies deduct money from employees' paychecks in order to fund these programs.
According to FICA, Social Security, and Medicare are funded by a portion of each employee's salary that is contributed by both the employer and the employee. Now, employee contributions to Social Security and Medicare are 6.2% and 1.45%, respectively, while employer contributions are 12.4% and 2.9%, respectively.
To qualifying workers and their families, Social Security offers retirement, disability, and survivor benefits. The Medicare program offers medical benefits to qualified seniors over 65 and people with specific disabilities.
Usually, FICA taxes are deducted from employees' paychecks and paid to the government every three months. The self-employment tax, often known as the employee and employer components of the FICA tax, is due by self-employed people.
Federal law changes could result in a change in the FICA tax rate, so it's critical for both employers and employees to stay up to date on these developments to ensure that they're following the law.
