What is FICA and who pays it?
FICA (Federal Insurance Contributions Act) taxes fund Social Security and Medicare. In 2024, employees pay 6.2% for Social Security (on wages up to $168,600) and 1.45% for Medicare (on all wages, plus an additional 0.9% on wages over $200,000 for single filers / $250,000 for married joint filers). Employers match the employee's 6.2% Social Security and 1.45% Medicare contributions but do not pay the additional 0.9% Medicare tax. Self-employed individuals pay the combined 15.3% as self-employment tax but can deduct half.
How do I determine the correct federal income tax withholding?
Federal income tax withholding is based on the employee's W-4 form (Employee's Withholding Certificate), which captures filing status, number of dependants, and any additional withholding requests. Employers use the IRS Publication 15-T withholding tables or the IRS Tax Withholding Estimator to calculate the correct amount. The 2020 redesigned W-4 eliminated withholding allowances and uses a more direct income and deduction-based approach. Employees should update their W-4 after major life events (marriage, new child, job change).
When must employers deposit payroll taxes?
Federal payroll tax deposit schedule depends on your lookback period (total taxes reported in the 12-month period ending June 30 of the prior year): Monthly depositor (under $50,000) — deposit by the 15th of the following month. Semi-weekly depositor ($50,000+) — deposit by Wednesday for payroll on Wednesday–Friday, by Friday for payroll on Saturday–Tuesday. New employers use the monthly schedule. Next-day deposits are required if you accumulate $100,000 or more in taxes on any day during a deposit period. Failure-to-deposit penalties: 2–15% based on days late.