The Federal Insurance Contributions act or FICA, is the government agency responsible for collecting payroll taxes in the United States. The taxes collected under this federal department are used to fund Social Security benefits.
As a result of the agency responsible for the obtainment of these funds, the tax associated with Social Security benefits is commonly referred to as the FICA tax. The FICA tax has been a fundamental levy in the Federal Government’s system of operations since 1935.
FICA is a tax that is collected by a federal tax department; this levying process is held separately from more common taxation because other funding is typically obtained through the Internal Revenue Service. The FICA tax is collected to provide the benefits for the elderly, the disabled, and hospital insurance for those in need.
These benefits are funded by the Social Security system in the United States and health insurance benefits are delivered through the Medicaid tax. Both employees and employers in the United States are required to contribute to the FICA tax through payroll deductions and withholding a percentage of a given salary.
The FICA tax is typically collected at a rate of 7.65% on an individual or company’s gross earnings. The funds obtained are broken down through the delivery of 6.2% to Social Security, and 1.45% for Medicare.