fica
Definition
FICA stands for the Federal Insurance Contributions Act, which is the law that requires both you and your employees to contribute money toward Social Security and Medicare. As a business owner, you are responsible for withholding a portion of each employee's paycheck and then matching that same amount out of your own pocket before sending the combined total to the IRS.
Example
If you pay an employee $1,000, you will withhold about $76.50 from their paycheck for FICA taxes and then pay another $76.50 yourself, sending a total of $153 to the federal government.
Watch Out
Many new business owners get caught off guard by the matching requirement because they forget to budget for their own share of FICA on top of the employee's wages.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.