What is FICA? Social security and medicare make up the taxes known as Federal Insurance Contributions Act (or FICA). In this article, we’ll give the low-down on FICA for 2016, including current tax rates and when/how to send payments.
2016 FICA Tax Rates
Cost In Dollars or
Percentage (%) of
Maximum Dollar ($)
Amount Taxed Per
Total Cost For A
30,000 per Year
Social Security Tax
$118,500 (in 2016)
What is the FICA tax?
FICA taxes include both social security and medicare. As an employer, you’re required to withhold money from your employee’s paychecks to pay FICA taxes. You’re also required to pay your own contribution, separate from what your employee pays. Here’s what employers have to pay towards FICA:
- Employers must contribute 6.2% of salary / wages for social security on the first $118,500 paid to an employee (for 2016)
- Employers must contribute 1.45% of salary / wages for medicare without limit to the employee’s salary / wages (for 2016)
If that’s my contribution, then what do my employees have to pay? The formula here is very simple: Both you and your employee pay the same amount to FICA. You both pay 6.2% of the amount of their salary towards social security (or 12.4% total) and 1.45% towards medicare (or 2.9% total). The only difference is that employees who earn over $200,000 are required to pay a 0.9% Medicare surtax. Employers are not liable for this expense.
When Do I Pay FICA taxes?
Depending on the size of your payroll, you will need to calculate and make FICA payments to the IRS once per month, or semi-weekly. Payments must be made electronically through the IRS proprietary system called EFTPS.
- New employees make deposits on a monthly basis
- If you paid less than $50,000 in FICA taxes the past year, you’ll make deposits on a monthly basis
- If you paid more than $50,000 in FICA taxes, you’ll make deposits on a semi-weekly basis
For more on these timetables and for help determining where you fit, Jean Murray has a helpful guide on About Money.
One of the key benefits to using Gusto payroll software (formerly ZenPayroll) is that payments are sent automatically on your behalf, so you don’t have to worry about meeting any deadlines.
Where Do I Send FICA Taxes?
Payments can be sent electronically on the Electronic Federal Tax Payment System (EFTPS). To get started, you first need to enroll on the EFTPS website. You will need to supply your Employer ID Number (EIN) along with your personal and business contact information. You’ll also need to enter the bank account number and routing number for the account you’ll use to send payments.
According to the EFTPS website, it takes 5 to 7 business days to receive your PIN, which is required for you to login and make payments. So you want to make sure you apply well in advance of any deadlines.
The Bottom Line
Fortunately, the ability to pay online makers FICA taxes a bit easier for new employees. An even simpler option, however, is to use payroll software like Gusto. Gusto can automatically calculate FICA taxes as you run payroll AND submit payments to the government on your behalf. It’s an ideal solution for new businesses who are looking setup payroll, as tax service is included at no extra cost. For more on Gusto, check out our review here.
Don’t forget to check out Gusto, our recommended payroll provider for small business.