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FICA taxes are made up of Social Security and Medicare taxes

The Federal Insurance Contribution Act (FICA) taxes are made up of two parts: Social Security and Medicare taxes.

Employers and employees spend on FICA taxes

Social Security Tax

Social Security, also known as the Old-Age, Survivors, and Disability Insurance (OASDI), provides insurance for retirement, death, or disability. Employers and employees contribute equal amounts – 6.2 percent each (12.4 percent total) – towards the tax. Whatever the employee pays, the employer pays. The maximum amount of an employee’s wages that are subject to the Social Security tax for 2018 is $128,400, an increase of $1,200 from the $127,200 maximum in 2017. In other words, only the first $128,400 of an employee’s wages can be taxed, making the maximum Social Security tax paid by an employee $7,960.80. The increase will take effect on January 1, 2018.

Medicare Tax

Medicare costs paid through payroll taxes
Medicare costs paid through payroll taxes

Medicare taxes support a federal health insurance program for individuals 65 years and older that covers hospital care, nursing and hospice care, medical equipment, prescriptions, and other medical expenses. The employer and employee each pay 1.45 percent (2.9% total). Unlike the Social Security tax, there is no cap or limit on income – all income is taxable.

An additional Medicare tax applies to high income tax payers. The regulation went into effect in 2013, and states that if individuals are paid in excess of the thresholds below, then they owe an extra 0.9 percent towards the Medicare tax (so a total of 2.35% (1.45% + 0.9%) for those making above $200,000). Only the employee pays this tax, not the employer.

Filing Status Threshold Amount
Married, filing jointly $250,000
Married, filing separately $125,000
Single $200,000
Head of Household (with qualifying person) $200,000
Qualifying widow(er) with dependent children $200,000

The total FICA tax is 15.3% (12.4% Social Security + 2.9% Medicare).

Penalties for Depositing FICA Taxes Late

Standard penalties for late or incorrect deposits of federal income tax, Social Security and Medicare taxes include:

2% Deposits made 1 to 5 days late
5% Deposits made 6 to 15 days late
10% Deposits made 16 or more days late. Also applies to amounts paid within 10 days of the date of the first notice the IRS sends asking for the tax due
10% Amounts (that should have been deposited) paid directly to the IRS, or paid with your tax return.
15% Amounts still unpaid more than 10 days after the date of the date of the first notice the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier.

(based on the % of due tax)

Trust Fund Recovery Penalty

Trust fund taxes are federal income taxes and Social Security and Medicare taxes withheld from the employee. Trust fund taxes that are withheld from employee’s paychecks, but aren’t sent to the federal government can be penalized. Those individuals responsible can be held personally liable for the penalty – which is 100 percent of the unpaid trust fund tax, plus whatever interest is accrued. This penalty is applied to individuals who collect or pay taxes, and who “willfully” do not pay trust fund taxes.