FICA (Federal Insurance Contributions Act) is a federal payroll tax on the paychecks of employees, as well as mandated contributions from employers to fund the Social Security and Medicare programs. Both employees and employers are responsible for paying 6.2% of employee gross earnings for Social Security and 1.45% of gross earnings for Medicare. These are taken directly from an employee’s gross pay and there is no opt-out option.
If you’d prefer to not have to calculate and pay FICA tax yourself, consider using a payroll software like Gusto. Gusto automatically calculates FICA and all other payroll taxes for you so you can focus on running your business. Sign up for a free trial to see if it’s right for you.
FICA Tax Rate and When to Pay
Employees and employers share the total tax burden of Social Security and Medicare taxes. Half of the FICA tax amount owed is paid by the employer and the other half is withheld from an employee’s paycheck.
- Social Security Tax (12.4% total) – 6.2% is withheld from employee paychecks and the remaining 6.2% is paid by the employer. The tax is paid on wages up to $142,800 for 2021.
- Medicare Tax (2.9% total) – Employees’ share of 1.45% is withheld from their paychecks while the employer pays the remaining 1.45%. There is no income cap on Medicare taxes.
As an employer, it is your responsibility to remit both the employee share and your share of FICA tax on time. Deducting FICA properly is extremely important, so it’s vital that you understand the process while doing your payroll.
All payroll taxes that are paid by the employer, as well as taxes withheld from employee paychecks such as employer FICA tax, are reported on Form 941 and filed quarterly. Let’s now take a look at how to calculate FICA tax owed, how to make payments, and the due dates you must adhere to, plus penalties for not paying or paying late.
Form 941 is just one of many forms that employers are required to file on a quarterly/annual basis. Check out our payroll forms guide to make sure you are in compliance.
How to Calculate FICA Tax Owed
As employers and employees must contribute equally to Social Security and Medicare taxes, 7.65% (6.2% + 1.45%) of wages is deducted from an employee’s paycheck, and the employer pays 7.65% of wages paid to employees.
Social Security FICA Tax Wage Limits
For Social Security, the employer and employee must each pay on employee wages up to a maximum salary of $142,800 for 2021. What this means is that once an employee has earned $142,800, no additional Social Security is deducted from their paycheck for the remainder of the year. Since your tax amount must match the employee’s, you would also have no additional Social Security liability for the remainder of the year.
Summary of Social Security Wage Limits for 2019 through 2021
Social Security Wage Limit
Social Security FICA Tax Example
Let’s assume an employee earns $2,000 per pay period. The Social Security tax calculation would be as follows:
$2,000 x 0.062 = $124
In this example, you would deduct $124 from this employee’s gross pay for Social Security tax each pay period. Since the employer tax must equal the employee Social Security tax, your share as an employer would also be $124. Thus, the total Social Security tax payment that you would submit to the IRS for this employee (for this pay period) would be $248.
Medicare FICA Tax Wage Limits
There is no wage cap when it comes to Medicare taxes. What this means is that regardless of the amount of wages an employee earns, Medicare taxes must be paid on the entire amount. Similar to Social Security taxes, the employer will have to match the employee’s share equally.
Medicare Tax Example
Using the same employee who earned $2,000 per pay period, let’s calculate the Medicare tax:
$2,000 x 0.0145 = $29
In this example, you would deduct $29 from this employee’s gross pay for Medicare tax. Since the employer tax must equal what the employee Medicare tax is, your share as an employer would be $29. Thus, the total Medicare tax payment that you would submit to the IRS for this employee (for this pay period) would be $58.
How to Determine Your FICA Tax Due Dates
FICA tax due dates are dependent on your “lookback period.” Depending on your total FICA tax liability during this period, you’ll either have to pay FICA tax monthly or semiweekly. If you have less than $50,000 in tax liability during your most recent lookback period, you pay monthly, and if you have more than $50,000, you pay semiweekly.
How to Determine Your FICA Tax Lookback Period
Let’s say today is Jan. 1, 2021, and you need to determine when you are required to deposit your tax payments moving forward. You’ll either have to pay monthly for the previous month’s employer FICA tax owed or semiweekly for FICA tax owed the previous two weeks.
The three steps to determine your lookback period are:
1. Determine Your Lookback Period
The lookback period runs from July 1 to June 30 of the previous year. For 2021, your lookback period would be July 1, 2019, through June 30, 2020.
2. Get Copies of Form 941 Filed
This should include Form 941 forms filed for the lookback period. This would include the 941 tax forms filed for the following quarters:
- Quarter 3 2019 (July 1 – Sept. 30, 2019)
- Quarter 4 2019 (Oct. 1 – Dec. 31, 2019)
- Quarter 1 2020 (Jan. 1 – March 31, 2020)
- Quarter 2 2020 (April 1 – June 30, 2020)
3. Add Up the Tax Liability on Line 10 of Each Form 941
If your total tax liability for all four quarters is $50,000 or less, you must deposit your taxes on a monthly basis. Monthly taxes are due by the 15th day of the following month. On the other hand, if your total tax liability is more than $50,000, you must deposit your tax payments on a semiweekly basis. Semiweekly tax payment due dates are based on what day of the week your payday took place.
The exception to this is if your total taxes (on line 10) for the current quarter or the preceding quarter are less than $2,500. In this case, you do not have to make a deposit. Instead, you can send in your payment when you file your Form 941.
If you are a new employer, then you are automatically considered a monthly depositor since your tax liability for the lookback period would be zero.
Below is a summary table of each type of depositor, along with the due dates for tax payments:
Types of Depositors and Due Dates for FICA Tax Payments
If you reported $50,000 or less in taxes during the lookback period, you must make monthly payments to the IRS.
If you reported more than $50,000 of taxes during the lookback period, then you must make semiweekly payments to the IRS.
Payments are due by the 15th day of the following month.
Depending on what your employee payday is, your tax payments will be due as follows:
IMPORTANT NOTE: If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day, you become a semiweekly schedule depositor on the next day and remain so for at least the rest of the calendar year and the following calendar year. For more information, see the $100,000 Next-Day Deposit section in IRS Publication 15.
How to Make FICA Tax Payments
If you are a monthly or semiweekly depositor, then payments must be submitted electronically through the Electronic Federal Tax Payment System (EFTPS). Submitting payment via mail is not an accepted option.
The payments you submit should include income taxes withheld from all employee paychecks and both your portion and the employee’s portion of Social Security and Medicare taxes.
If you are not required to make payments during the quarter, you can mail payment with your Form 941 or submit it through the EFTPS.
FICA Tax Penalties for Late Payments
If you don’t deposit your payments on time or when you are required to do so, or your deposit is for less than the required amount, you may have to pay a penalty of 2% to 15%.
Below is a summary table taken from IRS Publication 15 of the penalties that you may be required to pay based on the number of days your payment is late.
Summary of Penalties for Late FICA Tax Payments
Number of Days Late
Deposits made 1-5 days late
Deposits made 6-15 days late
Deposits made 16 or more days late, but before 10 days from the first date of the first notice sent by the IRS requesting payment
Amounts that should have been deposited but instead were paid directly to the IRS or paid with your Form 941
Amounts still unpaid more than 10 days after the date of the first notice sent by the IRS requesting payment or the date you received the notice demanding payment (whichever is earlier)
FICA tax are federal payroll taxes that both the employee and employer are responsible for paying, and employers are liable if they don’t remit the funds in a timely manner. They cover both Social Security and Medicare and equate to a total rate of 7.65% for both employees and employers.
To avoid having to manually calculate and remit FICA tax on your own, consider using a payroll provider like Gusto. It will calculate, withhold, and pay FICA tax for you. Sign up for a free trial today.