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What is the meaning and purpose of FICA?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 asked

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

Hi, The Financial Intelligence Centre Act (38 of 2001) (the FIC Act) came into effect on the 1st of July 2003. The FIC Act was introduced to fight financial crime, such as money laundering, tax evasion, and terrorist financing activities. The FIC Act brings South Africa in line with similar legislation in other countries designed to reveal the movement of monies derived from unlawful activities and thereby curbing money laundering and other criminal activities.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

> What is the meaning and purpose of FICA? --The Federal Insurance Contributions Act (FICA) is a U.S. law requiring a deduction from paychecks and income that goes toward the Social Security program and Medicare. Both employees and employers are responsible for sharing the FICA payments. --FICA stipulates that there is a maximum that can be allocated to Social Security, while there is no maximum on what can go toward Medicare. Once the maximum to Social Security is achieved, the contributor's FICA payment will not increase the Social Security portion but will continue to increase the contribution to Medicare. The amount of the FICA payment depends on the income of the --contributor; the higher the income, the higher the FICA payment. --**Purpose** -Federal Insurance Contributions Act (FICA) tax imposed on both employees and employers to fund Social Security and Medicare federal programs that provide benefits for retirees, the disabled, and children of deceased workers. -The tax also provides funds to the health care system for institutions that provide healthcare for workers that do not have health insurance and cannot afford healthcare treatment. Social Securit -y benefits include old-age, survivors, and disability insurance (OASDI); -Medicare provides hospital insurance benefits for the elderly. The amount that one pays in payroll taxes throughout one's working career is associated indirectly with the social security benefits annuity that one receives as a retiree. - This has caused some to claim that the payroll tax is not a tax because its collection is tied to a benefit

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

The federal law which requires employers to withhold a portion of employee wages and pay them to the government trust fund which provides retirement benefits. An acronym for Federal Insurance Contributions Act. More commonly known as social security. The Federal Insurance Contributions Act is the federal law that requires you to withhold two separate taxes from the wages you earn. It includes Social Security Tax and Medicare Tax at a flat percentage rate. The Social Security Tax is 6.2% rate of your wages, and the Medicare Tax is 1.45% of your wages. If you earn more than $200,000, you will also be taxed an additional 0.9% Medicare surtax. You’re not the only one paying for FICA, however. Your employer is also matching the Social Security Tax of 6.2% and the Medicare tax of 1.45% of your wages. This is extremely important to understand if you are an independent contractor, as you will be responsible for paying on your wages earned, and matching that amount, as you are your own employer. In other words, you are responsible for paying the entire 12.4% Social Security tax, and 2.9% Medicare tax.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 answered

FICA Stands for Federal Insurance Contributions Act tax is a United States federal employment tax imposed on both employees and employers to fund Social Security and Medicare. (It can be compared to the Provident Fund Scheme/Employee State Insurance Scheme of India) The tax also provides funds to the health care system for institutions that provide healthcare for workers that do not have health insurance and can not afford healthcare treatment. The amount of the FICA payment depends on the income of the contributor; the higher the income, the higher the FICA payment. The FICA tax rate for the year 2016 is 7.65% which is divided into the social security tax (6.2%) and the medicare tax (1.45%). The tax rate for self-employed individuals is a combination of the social security tax rate (12.4%) and the Medicare tax rate (2.9%), which equals 15.3% which means that they are paying double (the employees part as well as the employers part). The Employers part (7.65%) can be claimed as a deductible expense also. Enjoy, Anshuman Prasad

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