Q:

How do you calculate FICA taxes?

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Quick Answer

The Federal Insurance Contributions Act is the combined total of Social Security and Medicare taxes, and it is applied to gross wages, according to the Internal Revenue Service. The Social Security tax rate is 12.4 percent, and the Medicare tax rate is 2.9 percent, which is split between employees and employers.

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Full Answer

The amount withheld from gross income is 6.2 percent for the 2015 tax year on income below $118,500, reports Bankrate. Even if income is above $118,500 in 2015, the maximum amount that can be deducted for the Social Security tax is $7,347. To calculate the total income withheld for this tax, multiply the total gross income for the year by 6.2 percent. This amount is the maximum the Social Security Administration can withhold during the year from the gross pay. Taxes are automatically deducted from an employee's paycheck and are given to the IRS.

Completing a W-4 results in Social Security tax payment deduction from employee pay. Self-employed individuals must calculate the amount and pay the IRS directly, states Bankrate. This is called the self-employment tax, and it is filed on Form 1040 while figuring federal income taxes. Medicare taxes are included in this total, and they also paid separately. This amount must be deducted from gross income when calculating federal tax totals.

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