If you have a job, then there is a good chance that you have
heard of FICA taxes since these are taxes that all people have to pay, like it
or not. Employers withhold FICA taxes from your paycheck, which may leave you
wondering what, exactly, these taxes are and where your money is going.
In basic terms, FICA taxes are Social Security and Medicare
taxes. They are paid both by workers and employers.
They are called FICA taxes because FICA stands for “Federal
Insurance Contributions Act,” an act which has been around since the 1930s and
has affected taxes ever since.
Now that you know what FICA taxes are, you may be wondering
just how much they’re costing you. The answer, however, varies from person to
person. The total FICA tax is always 15.3% of an employee’s gross income, with
the employer and employee each paying half or 7.65%.
Of course, not all funds that you earn are going to be
taxable under FICA. Social security wages, for example, are exempt from FICA
taxes. If you have concerns about what is and is not exempt in terms of your
wages, you can speak with your employer or with a financial adviser to ensure
that everything is being handled correctly.
Sometimes, employers do accidentally deduct too much in FICA
taxes. When this happens, you are entitled to a full refund of the overage, and
this money will not be taxed or treated as income since you should have already
received it. You should talk with your employer if you believe too much was
accidentally withheld from your pay for FICA taxes.