However, only employees are responsible for paying the Additional Medicare Tax. FICA may not sound like a whole lot of fun, but since it’s going to be part of your life every couple of weeks, now is a great time to read all about it. Let’s go into a bit more detail on both FICA taxes and take a look at the 2025 tax rates. That’s where OnTheClock’s time tracking and payroll services come in. Don’t leave payroll up to chance — simplify the process with OnTheClock today.

You want to be sure you’re not paying more than you’re required to. Remember, if you’re self-employed, you’ll need to use the IRS worksheets to ensure you’re paying the correct amounts. Overpayment of FICA taxes can occur if you have multiple jobs. If your combined income exceeds the wage limit, you may be eligible for a refund of the excess Social Security tax paid. Just like Social Security Tax, employers have to match each employee’s Medicare Tax contribution dollar-for-dollar.

Social Security Tax

High-income earners must pay an extra Medicare tax under FICA. This Additional Medicare Tax applies to individuals earning over $200,000 annually ($250,000 for married couples filing jointly). The additional tax rate is 0.9% and applies only to wages exceeding the threshold.

Clear Hours. Fair Pay.

If a church takes this exemption, employees don’t get out of paying taxes entirely — they’ll be responsible for self-employment tax instead. And if the IRS finds that the organization isn’t filing W-2s for two years, they can retroactively revoke the exemption. If you’re juggling more than one employer, each one must withhold Social Security taxes as if you haven’t hit the wage cap — because they don’t coordinate with each other. That means you could end up paying more Social Security tax than necessary.

• You’ll need to fill out SE Form 1040 to pay your self-employment taxes, not Form 941.
• That’s where OnTheClock’s time tracking and payroll services come in.
• Wage earners cannot deduct Social Security and Medicare taxes.

Religious Individuals: No Social Security, No Benefits

Some employees pay more Social Security taxes than they need to. This could happen if you switch jobs more than once and all of your earnings are taxed, even if your combined income exceeds the Social Security wage base limit. Fortunately, you may be able to get a refund when you file your taxes. For the past couple of decades, however, FICA tax rates have remained consistent. For both of them, the current Social Security and Medicare tax rates are 6.2% and 1.45%, respectively. So each party – employee and employer – pays 7.65% of their income, for a total FICA contribution of 15.3%.

Payroll Services

If multiple jobs result in excess Social Security tax payments, the overage can be reclaimed when filing a tax return. Medicare is a federal health insurance program primarily for individuals aged 65 and older, as well as certain younger individuals with disabilities or qualifying medical conditions. FICA funds Medicare Part A, which covers hospital stays, skilled nursing care, and some home health services. Unlike Social Security, Medicare taxes apply to all earnings with no wage cap. Social Security provides monthly payments to retired workers, disabled individuals, and surviving family members of deceased workers. Workers earn “credits” based on their earnings, with a minimum number required to qualify.

When you file your tax return, the IRS will let you claim a refund for any extra Social Security tax withheld. Navigating FICA tax rates and employer responsibilities doesn’t have to be a headache. By understanding 2025 rates and staying proactive about payroll management, you can keep your business running smoothly. FICA withholding is the amount automatically deducted from an employee’s paycheck to fund Social Security and Medicare programs.

This proactive approach can prevent financial strain when tax payments are due. Additionally, staying informed about any changes in FICA tax rates or caps can help you adjust your financial strategy as needed. Employers are required to withhold 1.45% of each employee’s taxable wages to cover it. Unlike the Social Security Tax, there is no maximum wage base limit for the Medicare Tax.

Payroll Taxes vs. FICA: What’s the Difference

• Retirees don’t pay FICA tax on retirement income, but if they earn wages from a job, they are required to pay FICA tax on those earnings.
• Workers earn “credits” based on their earnings, with a minimum number required to qualify.
• Also known as payroll taxes, FICA taxes are automatically deducted from your paycheck.
• But by not paying these payroll taxes, they waive the right to receive Medicare and Social Security benefits.
• Self-employed individuals, including freelancers and independent contractors, pay both the employee and employer portions of FICA taxes.

They can deduct the employer-equivalent portion, reducing their taxable income. Payments are made through estimated quarterly tax filings rather than automatic paycheck deductions. If you have multiple jobs, you can claim the Social Security overpayment on Form 1040. If you owe any fica vs seca taxes, the IRS will use part of your refund to pay them off. If you overpaid Social Security taxes and you only have one job, you’ll need to ask your employer for a refund. Excess Medicare tax repayments are nonrefundable since there’s no wage base limit.

FICA contributions ensure that employees receive Social Security and Medicare, giving employees financial security in retirement or in case of disability. Along with FICA taxes, employers need to understand the Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA). These taxes fund unemployment benefits for workers who lose their jobs. Failure to properly withhold and deposit payroll taxes can result in significant penalties. If FICA tax isn’t withheld correctly, the employer may have to pay both the employer and employee portions, along with penalties and interest.

The employee could also lose Social Security and Medicare credits, which may affect future benefits. While most workers contribute to FICA, some individuals qualify for exemptions. Certain religious groups can opt out if they meet strict IRS criteria, such as belonging to a recognized sect that opposes public insurance programs. Members must file IRS Form 4029 and, if approved, will not receive Social Security or Medicare benefits in retirement. While FICA taxes are automatically taken out of your paycheck as an employee, you’ll need to pay close attention if you change jobs or have more than one.

Interest and penalties will continue to accrue until your tax liability is resolved in full. The answer is that, under SECA (the Self-Employed Contributions Act) you pay both the employee portion and the employer portions of the tax. This means that if you’re a self-employed individual you’re paying 12.4% for Social Security Tax and 2.9% for Medicare Tax. And if you’re a high wage earner, you’ll still have to pay the 0.9% Additional Medicare Tax above your earnings threshold. FICA taxes are paid on ordinary earned income (and not on investment or passive income), and they are paid by both employees and self-employed individuals. Employees pay 50% of FICA taxes, and their employers pay the other 50%, whereas self-employed individuals pay 100% of their own FICA taxes.

Paying the right taxes on time helps you avoid fines, audits, and back payments. They might have sounded complicated at first, but once you break FICA taxes down, it’s pretty straightforward and manageable. Federal taxes for Social Security and Medicare are mandatory, so understanding them is important for all HR professionals.