Social Security Tax (FICA)Definition: A tax paid by workers and employers on wages earned that supports the benefit programs under the Social Security System
The Federal Insurance Contributions Act, or FICA, provides for a federal system of old-age, survivors, disability and hospital insurance. The old-age, survivors and disability insurance part is financed by the Social Security tax. The hospital insurance part is financed by the Medicare tax.
FICA requires employers to match and pay the same amount of Social Security tax as the employee does. Charts and instructions for Social Security deductions come with your IRS payroll forms. Congress has mandated requirements for depositing FICA and withholding taxes, and failure to comply with these regulations subjects a business to substantial penalties.