The employer FICA match

When an employer computes payroll taxes for a payroll, there are two taxes where it is required by law to pay to the government an amount identical to the amount that its employees are also required to pay. These two situations are known as the employer FICA match. FICA refers to the Federal Contributions Insurance Act, which is the law that requires these matching payments. The taxes requiring employer matching are:

  • Social security tax. This is usually a 6.2% tax to both the employee and the employer, up to a maximum annual wage cap that is commonly ratcheted up at the beginning of each calendar year. Social security tax rates and maximum caps are recorded in a separate table. For example, on gross wages of $1,000, a company will remit $124 to the government, of which $62 was withheld from the employee's gross wages and $62 was paid by the company (and which it records as an expense). The amount withheld from employee wages is recorded by the employer as a liability (but not an expense), since the employer has an obligation to remit these funds to the government.
  • Medicare tax. This is a 1.45% tax to both the employee and the employer, with no upper limit on the amount paid. Thus, on gross wages of $1,000, a company will remit $29.00 to the government, of which $14.50 was withheld from the employee's gross wages and $14.50 was paid by the company (and which it records as an expense). As was the case with the social security tax, the amount withheld from employee wages is recorded by the employer as a liability (but not an expense), since the employer has an obligation to remit these funds to the government.

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Payroll Management