FICA stands for Federal Insurance Contributions Act.docx

FICA stands for Federal Insurance Contributions Act.docx -...

This preview shows page 1 - 2 out of 6 pages.

1 Chapter 4 FICA stands for Federal Insurance Contributions Act, it’s a federal law that requires tax payers to withhold two separate taxes from the salary you earn. It includes social security and Medicaid taxes at a fixed percentage rate. “The Social Security Tax is 6.2% rate of your wages, and the Medicare Tax is 1.45% of your wages. If you earn more than $200,000, you will also be taxed an additional 0.9% Medicare surtax. You’re not the only one paying for FICA, however. Your employer is also matching the Social Security Tax of 6.2% and the Medicare tax of 1.45% of your wages. This is extremely important to understand if you are an independent contractor, as you will be responsible for paying on your wages earned, and matching that amount, as you are your own employer. In other words, you are responsible for paying the entire 12.4% Social Security tax, and 2.9% Medicare tax” (Hendriksen, 2014). Adjusted Gross income is simply your income after subtracting all the applicable adjustments. These adjustments include: earnings from your job, self-employment, alimony income like child care and interest from a bank account, student loans minus standard or itemized deduction that you might be eligible for. “Your adjusted gross income (AGI) is calculated by adjusting your gross income for contributions to individual retirement accounts (IRAs), alimony payments, interest paid on student loans, and other special circumstances. Note
Image of page 1

Subscribe to view the full document.

Image of page 2
  • Spring '17
  • vega
  • Taxation in the United States

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern