FICA is the acronym for Federal Insurance Contributions Act. The acronym is often used in the U.S. when referring to the combination of the Social Security tax and the Medicare tax.

Generally, all of an employee's earnings which are less than $118,500 in the calendar year 2015 are subject to payroll withholdings of 6.2% for the Social Security tax plus 1.45% for the Medicare tax. In addition, the employer is required to pay a similar amount. The result is that the employer must remit 15.3% (6.2% + 6.2% + 1.45% + 1.45%) of each employee's wages or salaries that are less than $118,500 in 2015. (The earnings base and the rates for other years and any surcharges can be found on IRS.gov.)

A self-employed person must pay both the employee portion and the employer portion of the FICA tax.

Learn Bookkeeping: Gain unlimited access to our bookkeeping seminar videos, bookkeeping proficiency exams, bookkeeping cheat sheet, visual tutorials, and more when you upgrade to PRO.