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FICA, in plain English.
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.
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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.
- Treating FICA as one flat rate is where errors start.
- A payroll system that applies a combined percentage without tracking the two wage bases separately will over-withhold Social Security late in the year for high earners.
- The other trap is the employer match: the true cost of FICA to the business is roughly double the employee deduction, which surprises teams building labour cost forecasts off paycheque figures alone.
- 2000 Running payroll since Workzoom has run Canadian payroll for 26+ years.
- Canadian hosting on AWS available
- Trusted in production County of Renfrew, Silvera for Seniors, and Cable Bahamas. Built for 50 to 5,000 employees.
In the product
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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