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 afederal system of old-age, survivors, disability and hospitalinsurance. The old-age, survivors and disability insurance part isfinanced by the Social Security tax. The hospital insurance part isfinanced by the Medicare tax.
FICA requires employers to match and pay the same amount ofSocial Security tax as the employee does. Charts and instructionsfor Social Security deductions come with your IRS payroll forms.Congress has mandated requirements for depositing FICA andwithholding taxes, and failure to comply with these regulationssubjects a business to substantial penalties.
