Definition: The Federal Insurance Contributions Act Tax (FICA Tax) is a federal income tax that applies to employers with employees in the United States. It is calculated based on the employee's wage, and it is typically levied at 1.45% of an employee's earnings for each year during which they work.
The FICA Tax is one of several taxes that are collected by the Internal Revenue Service (IRS) to fund government programs such as Social Security, Medicare, Medicaid, and unemployment insurance. The purpose of the FICA Tax is to provide tax relief to employers who hire employees who have been working for a certain amount of time.
The definition of "FICA Tax" can be broken down into several key points:
1. "Federal Insurance Contributions Act": This is a federal law that defines what is considered an employer with an employee in the United States.
2. "FICA Tax": The FICA Tax is a tax collected by the IRS to fund government programs such as Social Security, Medicare, Medicaid, and unemployment insurance.
3. "Employees' wage": The amount of earnings that employees are required to report for federal income tax purposes.
4. "Employee's earnings": Employees who work for an employer in the United States receive compensation from their employers based on the hours worked and the number of days worked during a certain period.
5. "Yearly earnings": An employee must report earnings for each year during which they are employed by the employer, and an amount is calculated based on the number of hours worked during that period.
It's worth noting that the definition of "employees' wage" can vary depending on the specific context in which it is used, and it may also be subject to change.
federal insurance contributions act tax
