Every employed person in America has to pay the Federal Insurance Contribution Act tax commonly known as FICA tax. FICA withholding is done on the employees’ wages or salary where a deduction of a certain percent is made per annum usually 15.3 %. This deduction on the employee’s salary must be marched by the employers’ contribution in an equal measure every year. Where the employer pays half of the 15.3 per cent and the employee pays the other half which by law is withheld by the employer as per the Federal Government rules. FICA tax must be paid by every working American, which means that even the self-employed must pay the tax and pay the whole 15.3 percent, both the employer’s half and the employees half.
What is FICA Used For?
FICA tax is a prerogative of the government where tax is paid for the for the sake of retirement, survivors, as well as Medicare or hospital fund. It is compulsory for every worker in America to pay the tax according to the stipulated percentage distribution.
FICA withholding is the work of an Employer, who is required to do the same every year on the salaries or wages he pays to his workers to a particular percentage. This must be done monthly as he pays his employees. The employers work does not just end there, he is supposed to file the paperwork for His employees on the FICA tax on time failure of which, the employee stands the danger of being punished on tax evasion or nonpayment charges.
The IRS and FICA
The Internal Revenue Services commonly known as IRS have the ability to monitor taxes and taxpaying individuals and therefore are able to enforce tax payment. It is actually safer and more of an advantage to pay taxes on time because lack of payment will attract the attention of the IRS. It is true that they will not move on tax defaulters from the first month, but where tax defaulting can no longer be ignored, the IRS will send an invitation to the defaulter asking Him to make a tax payment plan. If this is not done, the IRS will after sufficient notice, move in with an IRS Wage Garnishment order, a tool that will be used to recover all the unpaid taxes by either taking possession of an employee’s valuable goods, or a huge portion of the salary or wages, till the defaulted taxes are cleared. If by any chance, the fault is not the employees but the Employer who fails to remit the FICA tax on time even when he has done the FICA withholding on the employee’s wages or salary, then all the punishment will be borne by the employer.
Once in a while, an employee may over pay on the taxes, for one reason or another. In such a case an employee is eligible for a tax refund. Once an application is made to the IRS, the tax refund advance should be received within a relatively short time.
The best investment advice to heed to is paying the FICA tax and any other taxes on time. Read through the IRA tax rules and consider that rule that will best suit your investments.