FICA is the acronym for Federal Insurance Contribution Act. This tax is imposed by the United States Federal government to employees as well as employers in order to fund Social Security and Medicare. However, most people refer to it as FICA. It is the tax collection mechanism for social security. FICA tax is used to provide for the federal system of old age, survivors, disability and hospital insurance. While the first three are funded by the social security fund, hospital insurance is the premise of Medicare tax.
FICA Tax Rates
All employees in the United States are required to pay FICA tax but there is a limit to what one can pay. The FICA tax rate is generally 7.65 per cent on gross earnings this rate has not changed since 2005 and now in 2011 it is still the same 7.65 per cent. However, there are social security earning limits which change every year in that respect.
However, there are ways through which you may not need to pay these taxes. Some of these ways include, tax lien certificates which simply put is payment of taxes on behalf of real estate owners when they are unable to satisfy the lien on their property tax. In which case the government allows investors to pay the money on their behalf and they get a certificate which exempts you from paying property tax.
After becoming the owner of the tax lien certificate, all that an individual has to do is to wait. While paying the property tax finally, the individual will have to pay the amount that you have paid for the tax lien certificate as well as the interest for the amount. You will then be required by the government to return the tax lien certificate. Individuals who are unable to pay off the tax debt should seek advice on how to settle tax debt.
Or you can invest in your retirement in which case your life savings are taxed as you are investing, in this way, you end up with a tax free retirement plans. Some of this include Roth IRA which simply put is the way in which you pay your taxes at the current rate marginally and your retirement savings are consequently tax free.
Over-payment of social security tax
It is indeed possible to overpay the social security tax if you have been working with more than one employer and have an income in excess of $106,800 in the previous years – 2010, 2009, as well as in the year 2011. If this is the case, then you will be eligible to claim a refund of the tax when you file your personal income tax return.
Other investment plans that lookout for retirement includes the plans under the Investment Retirement Accounts or Individual Retirement Accounts. These plans allow for tax free contributions to be made towards the accounts. Another benefit of these plans is that the amount in the account grows tax deferred. Being equipped with the knowledge of the various IRA tax rules would be helpful in selecting the best plan to suit your requirements.