Why it matters
FICA is part of every payroll and every payroll tax return. A payroll error that misses FICA shows up as an underpayment, a notice and a correction, and the employer share is a real cost the client must budget for.
Example
A client runs payroll for an employee. The payroll provider withholds the employee's Social Security and Medicare share, adds the employer's matching share and deposits the total with the IRS.
Related terms
Questions about FICA
What is the difference between FICA and income tax withholding?
FICA funds Social Security and Medicare and is a fixed percentage of wages. Income tax withholding depends on the employee's W-4 and the tax tables.
Does the employer pay FICA on the owner's wages?
The employer pays its share on wages, including reasonable compensation paid to a corporate officer. A partner's guaranteed payments and a sole proprietor's draw are not wages and follow different rules.