Your pay stub deducts money for FICA. What does this mean?
A. Money is being withheld for personal exemptions and deductions.
B. Money is being withheld for excise and estate taxes.
C. Money is being withheld to fund Social Security and Medicare.
D. Money is being withheld for federal, state, and city taxes.
The correct answer is A.
To find out what the term "FICA" stands for and what it means on your pay stub, you can follow these steps:
1. Look for an "Income Tax Deductions" section on your pay stub. This is where various taxes and deductions are typically listed.
2. Find the line item or abbreviation that says "FICA" or "FICA Taxes." This is the specific deduction you are inquiring about.
3. Once you have located the FICA deduction, you can refer to the official definitions to understand its meaning.
With that said, the correct answer is C. Money is being withheld to fund Social Security and Medicare.
The Federal Insurance Contributions Act (FICA) is a United States law that requires employers and employees to contribute a portion of their wages to fund two major government programs: Social Security and Medicare. Social Security provides benefits to eligible retired individuals, disabled individuals, and their dependents, while Medicare provides healthcare coverage to individuals who are 65 or older or who have certain disabilities.
On your pay stub, the FICA deduction consists of two parts: Social Security and Medicare taxes. The Social Security tax rate is 6.2% of your wages, up to a certain income limit. The Medicare tax rate is 1.45% of your wages, with no income limit.
It's important to note that employers also contribute an equal amount towards Social Security and Medicare on behalf of their employees. These contributions collectively fund these important government programs, ensuring that individuals receive retirement benefits and access to healthcare later in life.
So, if you see FICA deductions on your pay stub, it means that a portion of your wages is being withheld to fund Social Security and Medicare programs.