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Fica Tax: Differentiate Between Fica Vs. Federal Income Tax

Referencing Styles : MLA | Pages : 1

The Federal Insurance Contributions Act (FICA) is a federal law that is required to withhold three different taxes from the salary paid to each of the employees. FICA consists of the following taxes:

1. Social Security tax which is 6.2%

2. Medicare tax that is 1.45%

3. Since the year 2013, Medicare surtax of 0.9% only when the employee earns over 200,000 dollar.

These amounts are withhold from the salary of the employees.

According to this law, an employee has to pay a portion of the employer. These taxes include:

1. Social security tax of 6.2%

2. The Medicare tax of 1.45%.

Thus, the portion of the employers’ tax for Social security and Medicare is the same amount that is being withhold from the wages of the employees. Varied rules and regulations are applied on the employees who receive tips. Only the 0.9 percent of the Medicare surtax is mitigated from the employers’ portion.

An employee has to pay the 6.2% social security tax from the wage and also an additional of 6.2% of the portion of the employers tax which means 6.2 (employee portion)+ 6.2 (employer portion)= 12.4 %. Another tax is the Medicare tax. An employee has to pay 1.45 Medicare tax from the salary and an additional share of the employer which is 1.45%. Thus, an employee has to pay 1.45% (employees portion) + 1.45 (employer portion) = 2.9%. Hence the employee has to pay in total 15.3%. An employee has to pay an extra 0.9% Medicare surtax when the earning goes above 200,000 dollar in a calendar year.

Calculation:

The employee has to pay Social security tax and Medicare tax along with the Medicare surtax. The obligations of the employer and the employee are different. In many cases, the amounts the employee has to withhold and the employee’s surtax liability do not match. From the perspective of the employees, 0.95 Medicare surtax is imposed on compensation, self-employment earning and wages above a threshold amount that depends on the filing status of the employees. Once the threshold is reached, the tax is imposed to all the wages that are under the Medicare tax, to the Railroad Retirement Tax Act or to the Self-Employment Compensation Act. The threshold amount are:

 Filing status

Threshold amount

Married filing jointly

250,000 dollar

Married filing separately

125,000 dollar

Single, Head of the house, Qualifying widow (er)

200,000 dollar.

Differences:

Federal income tax is applied is all the income, regardless of the process of earning. On the other hand, FICA is only imposed on the earned income, which includes wages, salaries and compensations. In case of federal income tax, a number of deductions are claimed like contributing to certain retirement plans, student loan interest. On the other hand, these deductions cannot be claimed when the employer checks the FICA taxes that id due from the employees’ pay check. The tax rates for both the taxes are different. The federal income tax is a more progressive tax which means, high income is taxed more with a higher rate whereas the FICA depends on the tax filing status.

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