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What is The Federal Insurance Contributions Act? FICA Tax - Lessons in Payroll with Charles Read

#education #FICA #payroll GetPayroll's President Charles Read shares his years of knowledge of the payroll landscape with the masses. today's Payroll Lesson: A brief guide to the Federal Insurance Contributions Act, or FICA for short. GetPayroll.com TRANSCRIPT: Hello, I’m Charles Read, president of GetPayroll. As an employer, it’s essential to understand FICA. That is an acronym for the “Federal Insurance Contributions Act”. Or the U.S. federal payroll taxes that are deducted from everybody's paychecks. FICA is both Social Security and Medicare taxes. To put a number to this: Generally, barring some exceptions, 6.2% of an employee’s gross wage goes to Social Security, and 1.45% goes to Medicare. The employer then matches these amounts for the equivalent of 15.3% of the employee's gross wages. Now as an employer, I’m sure the first question you have is: “Is this tax mandatory?” Yes, FICA taxes are mandatory employment taxes that must be both withheld and paid on behalf of each employee. Employers must pay FICA taxes on a calculated schedule. These taxes are reported on IRS Form 941 or 944. If you pay or report FICA taxes late, the internal revenue service will charge YOU, the employer, penalties of up to 15% for late depositing and an additional penalty of up to 25% for late filing of forms. They will also charge interest on the undeposited amounts and the unpaid penalties. If the employer fails to pay or report FICA taxes, the employer’s owner or officers can be held personally liable for the taxes. The employee portion is not dischargeable for the responsible party even in individual bankruptcy. Making sure that your employment taxes are filed timely is essential, and is a guaranteed service we at GetPayroll provide to all of our clients. Employers are responsible for submitting FICA taxes—both the employees’ share and the employers’ share, after each payroll period. If you, the employer, reported less than $50,000 in the mandated “Look Back” period, then you may file your FICA taxes monthly. However, If you reported more than $50,000, then you must make semiweekly deposits to the IRS. Additionally, you must file Form 941 quarterly. Reporting your payroll amounts, and your tax withholding amounts every three months. For Self-employed individuals, you must pay the full 15.3 percent of FICA taxes. This is referred to as the self-employment tax. This is paid as part of your Form 1040 Individual Income Tax Filing. It might seem a bit overwhelming when calculating payroll taxes. If you decide do-it-yourself payroll isn’t the right choice for you, it may be time to outsource to a qualified payroll service provider, to handle payroll for your business. At GetPayroll we make sure all of our clients' payrolls run with 100% compliance. If you’re looking to outsource your payroll process contact us today at GetPayroll.com/quote. Thanks for listening.