What Is FICA?

FICA is the acronym for the Federal Insurance Contributions Act. This act mandates that an employer withhold a set percentage of an employee’s salary each pay period.

FICA also requires that the employer match the employee’s amount and contribute the money to a government account known as the Social Security Trust Fund.

The FICA tax is considered a regressive tax on income (with no standard deduction or personal exemption deduction) and is imposed (for the years 2009 and 2010) only on the first $106,800 of gross wages. The tax is not imposed on investment income (such as interest and dividends).