FICA Tax And Tax Withholding

How FICA Tax And Tax Withholding Work: Your Complete Guide

Do you have a job? If so, your employer likely withholds money from each paycheck to send to the government. This is called tax withholding. The government uses this money to pay for programs like Social Security and Medicare. In this post, we will discuss about FICA Tax and Tax Withholding. We will discuss how FICA tax works and what it covers. We will also talk about tax withholding and how it affects your paycheck. Let’s get started!

What Is FICA Tax And How Does It Work?

  • FICA tax is a payroll tax that funds Social Security and Medicare, which are programs that provide benefits for retirees and those who are disabled or have low incomes. The FICA tax consists of two parts: the Social Security tax and the Medicare tax.
  • The Social Security tax funds retirement benefits, while the Medicare tax funds healthcare benefits. The FICA tax is deducted from an employee’s paycheck, and the employer also contributes to the FICA tax. Self-employed individuals are also required to pay the FICA tax.
  • The current FICA tax rate is 15.30%, with the employee paying 12.40% for Social Security and Medicare taxes each. However, this amount may change in future years.

What Is Tax Withholding And How Does It Work?

  • Tax withholding is the amount of money that an employer withholds from an employee’s paycheck and sends to the government to pay the employee’s taxes.
  • The amount of tax withheld depends on several factors, including the employee’s tax bracket, filing status, and the number of allowances.
  • Employees can use the IRS withholding calculator to determine how much should be withheld from their paycheck.
  • It is an important part of the tax system because it helps to ensure that taxpayers pay their taxes throughout the year.
  • When taxpayers don’t have enough money withheld from their paycheck, they may end up owing taxes at the end of the year. On the other hand, if too much money is withheld, taxpayers will receive a refund when they file their taxes.
  • Employees can choose to have more or less money withheld from their paycheck by claiming more or fewer allowances on their W-4 form.

How FICA Tax Or Withholding Tax Are Calculated

  • FICA tax is calculated by taking a percentage of an employee’s gross pay. The current FICA tax rate is 7.65%, which is made up of a 6.2% Social Security tax and a 1.45% Medicare tax. This means that if an employee earns $1,000 in gross pay, the employer will withhold $76.50 in FICA taxes (1000 x 0.0765 = 76.50). FICA taxes are only withheld from employee wages; they are not levied on employer contributions or tips.
  • Withholding tax is calculated using a different method. Rather than taking a percentage of an employee’s gross pay, withholding tax is based on the information provided on the IRS W-4 form. This form includes factors such as the employee’s filing status and several allowances. Based on this information, the employer will withhold a certain dollar amount from each paycheck. The withholding tax rate can range from 0% to 39.60%. For example, if an employee earning $1000 per week is married and has two allowances, their employer will withhold $154 from their paycheck (1000 x 0.1540 = 154). Withholding taxes are not just limited to income tax; they can also include FICA taxes and other payroll taxes.
  • It’s important to note that FICA taxes are not levied on tips or employer contributions. Withholding tax is based on the information provided on the IRS W-Wage form which includes such factors as your filing status and several allowances. The Withholding tax rate can range from 0% to 39.60%. Other payroll taxes may also be withheld from your paycheck.


No one wants to pay more taxes than they have to, so it’s important to understand how payroll taxes work. And what you can do to make sure you are withholding the correct amount. The good news is that with a little bit of planning and some knowledge, you can take control of your FICA tax and tax withholding and ensure that you aren’t overpaying or underpaying on your taxes.

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