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Social security and Medicare taxes are collectively known as FICA or payroll taxes. For a wage...

Social security and Medicare taxes are collectively known as FICA or payroll taxes. For a wage earner, FICA taxes are significant. Explain how FICA is computed and how employers contribute. Discuss the benefits of social security and Medicare.
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Answer #1

FICA is computed on gross pay multipled with some special rates of Social security (6.20%) and Medicare(1.45%) taxes.

Both employee and employer contribute towards FICA. Employer withhold FICA from employees earning and same amount employer contribute towards FICA.

Example: Groos pay $2,000 per week. FICA will be $153 (2000*7.65%). Employer withhold $153 from employee earning and same amount of $153 is contributed by employer, So total of $306 is contributed.

Social security is some kind of retirment benefit. After retirement you will continue to receive pension till death and Medicare taxes are some kind of insurance benefits as you will hospitalised and medical bill is idemnified by govt.

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