United States

FICA, in plain English.

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FICA, the Federal Insurance Contributions Act, is the US payroll tax funding Social Security and Medicare. It is two separate taxes collected together. Social Security is withheld at 6.2 percent from the employee and matched by the employer, up to an annual wage base that changes each year. Medicare is withheld at 1.45 percent and matched, with no wage ceiling. Workzoom calculates both components on every US pay run.

How FICA works.

The single most useful thing to understand about FICA is that it is two taxes wearing one name, and they behave differently. Social Security stops once an employee reaches the annual wage base, so a high earner's withholding drops mid-year while Medicare keeps going. Medicare has no ceiling at all, and an Additional Medicare Tax applies above a statutory threshold on the employee side only, with no employer match on that portion. Because the two ceilings differ, W-2 Box 3 and Box 5 legitimately carry different numbers for the same person.

Where FICA goes wrong.

2000 Running payroll since Workzoom has run Canadian payroll for 25+ years.
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How FICA runs on Workzoom.

FICA is part of the Workzoom Payroll Suite. Workzoom runs HR, workforce, and talent on a single employee record across ten countries: Canada, the United States, the Bahamas, Jamaica, Trinidad and Tobago, Barbados, Antigua and Barbuda, Anguilla, the Cayman Islands, and the United Kingdom. Full gross-to-net payroll runs live in Canada, the United States, and the Bahamas. Pricing starts at $4 per employee per suite per month.

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Questions about FICA

What does FICA stand for?

FICA stands for the Federal Insurance Contributions Act. It is the US payroll tax that funds Social Security and Medicare, collected from both the employee and the employer.

Is FICA one tax or two?

Two. Social Security is withheld at 6.2 percent and matched by the employer, but stops once the employee reaches the annual wage base. Medicare is withheld at 1.45 percent and matched, with no wage ceiling. They share a name and a deduction line, not a set of rules.

Does the employer pay FICA too?

Yes. The employer matches both the Social Security and the base Medicare components, so the total FICA cost to the business is roughly double what appears on the employee's paycheque. The Additional Medicare Tax on higher earnings is the exception, as it is employee-only with no employer match.

Why do Box 3 and Box 5 on my W-2 show different amounts?

Box 3 reports Social Security wages, which stop at the annual wage base. Box 5 reports Medicare wages, which have no ceiling. For an employee earning above the Social Security wage base, the two boxes will always differ, and that is correct.

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FICA, in plain English.

How FICA works.

Where FICA goes wrong.

How FICA runs on Workzoom.