June 19th, 2017
My younger cousin started his first part time job at the age of fourteen at an amusement park. After working two long weeks for $7.25/ hour (the minimum wage in 2012), he was thrilled about receiving his first pay check. He quickly opened his envelope with a huge smile on his face but suddenly the smile transformed into a puzzled frown. He looked up at his parents and screamed, “Who is this FICA and why is he stealing from me?”
What (or who) is FICA?
Federal Insurance Contributions Act (FICA) tax is a United States federal payroll (or employment) tax imposed on both employees and employers to fund Social Security and Medicare. FICA is comprised of a 6.2 percent Social Security Tax and 1.45 percent Medicare tax. The 6.2 percent Social Security tax helps fund benefits for retirees, disabled people, and children of deceased workers. The 1.45 percent of Medicare tax is used to provide medical benefits for certain individuals when they reach the age of 65.
Who is paying the FICA tax?
Unlike federal or state income taxes, employers are required by law to withhold a percentage of an employees’ wages for FICA. So how much does the employer pay? The same amount! Employers must pay 7.65% of each employee’s wages so both the employer and employee contribute the same amount. The IRS receives 15.3% of each employee’s wages for FICA tax.
FICA Tax Exemptions
Some individuals in F-1 and J-1 non immigrant status are exempt from FICA payments for a certain time period. Below are a few of the common FICA tax exemptions:
General Student FICA Exemption: FICA taxes do not apply to payments received by students employed by a school, college or university where the student is pursuing a course of study.
Qualifying Religious Exemption: Members of certain religious groups could qualify for the exemption, but it must be recognized religious sect opposed to accepting Social Security benefits. The exemption isn’t automatic; you must apply for it by completing Form 4029.
Nonresident aliens: A nonresident alien working in the U.S usually pays Social Security tax on any income made here. However, there are some exceptions. For example, foreign students and educational professionals in the U.S on a temporary basis don’t have to pay Social Security taxes.