What is Federal insurance contributions act (FICA)?

The Federal Insurance Contributions Act (FICA) covers Social Security and Medicare taxes, which fund benefits for retired workers and individuals with disabilities.

FICA Explained  

FICA taxes are shared by both employees and employers, with each contributing a percentage of taxable wages to support Social Security and Medicare programs.

With GoCo's Embedded Payroll, these tax payments are automatically calculated, withheld from payroll, and submitted on your behalf.

Here’s a quick breakdown of the 2024 FICA rates for Social Security and Medicare taxes. For more details, you can always visit the IRS website Topic no. 751, Social Security and Medicare Withholding Rates

Social Security Tax

• Total rate: 12.4%
  • 6.2% paid by the employer
  • 6.2% paid by the employee
• Wage base limit: $168,600
  • After reaching this limit, no additional Social Security tax will be withheld for the year. This limit typically changes annually.

Medicare Tax

• Total rate: 2.9%
  • 1.45% paid by the employer
  • 1.45% paid by the employee

Additional Medicare Tax

• For employees earning over $200,000/year:
  • Employees will pay an additional 0.9% in Medicare tax. Employers are not required to match this extra amount but must withhold it from the employee’s pay.

Please note, employee W-4 elections only impact the amount of Medicare tax employees pay, not the amount employers contribute.

Are There Exemptions from FICA? 

Certain individuals and groups are exempt from FICA taxes. Here’s a breakdown of who may be exempt:

1. Some Student Employees:

   • Students employed by the same school, college, or university they attend may be exempt from FICA, as long as their job is incidental to their education.

2. Certain Nonresident Aliens:

   • Nonresident aliens on specific types of visas (such as F-1, J-1, M-1, or Q-1 visas) may be exempt from FICA taxes, depending on the duration and purpose of their stay.

3. Religious Group Members:

   • Members of certain religious groups opposed to accepting Social Security or Medicare benefits may apply for an exemption if their religious group has an official exemption from these programs.

4. Foreign Government Employees:

   • Individuals working for a foreign government or an international organization may be exempt from FICA taxes, depending on the terms of their employment and residency.

5. Family Employees in Certain Situations:

   • Employees working for a family business may be exempt from FICA taxes if they are employed by a parent and are under the age of 18.

6. Self-Employed Individuals:

   • Self-employed individuals do not pay FICA directly but contribute to Social Security and Medicare through self-employment taxes (SECA).

What to do if I have an employee with a FICA Exemption?

If you have an employee with a FICA exemption, verify they are properly set up during onboarding. If you discovered an employee's exemption status after initial set up, take the following steps so GoCo Embedded Payroll can accurately calculate taxes on their wages: 

1.If your employee tells you they're exempt from income tax withholding, have them complete a Form W-4, and indicate in their filing status they're “Exempt from withholding.”

2. Using your Employee's completed W-4, Email GoCo Support with updated information as well as the effective date of the exemption. 

3. Once the exemption is updated, if there is a correction that needs to occur, GoCo support will advise you of next steps and timeline for the correction. 

 For any additional questions, please reach out to us at help@goco.io 💚