FICA
These initials stand for Federal Insurance Contributions Act, which is the law that covers Social Security and Medicare tax payroll withholding rules. Amounts are withheld from the wages of employees for their contribution to the Social Security and Medicare programs. The withholding rate for Social Security contributions is 6.2% and for Medicare 1.45%. The maximum wage amount on which Social Security tax is paid for 2017 is $127,200 (up from $118,500 in 2016); there is no maximum for the Medicare portion. The employer also pays an amount equal to the employee’s contribution. If an employee works for 2 or more employers and has tax withheld for Social Security contributions on more than the annual wage maximum, the excess withholding is refundable as a tax credit on the employee’s income tax return.
Additional 0.9% Medicare Rate – If an individual's wages exceed $200,000 ($250,000 if filing a married joint return; $125,000 if filing a married separate return), the employee's Medicare rate on the excess earnings increases to 2.35%. The employer starts withholding the higher rate when wages exceed $200,000 regardless of marital or filing status. A taxpayer's additional Medicare tax that was withheld and his/her actual additional Medicare tax for the year is reconciled on his/her tax return, and if either too much or too little was withheld, the difference will be either a refundable credit or additional tax on the return.
|  |