February 12, 2026
If you have employees, FICA taxes are already your responsibility (whether you fully understand them or not). Many business owners hand payroll off to software and just trust the numbers. We get it, but knowing what’s happening under the hood can save you from some very unpleasant surprises.
Here’s what FICA actually is, how to calculate it, and what you’re on the hook for as an employer.
TL;DR: FICA = Social Security + Medicare taxes. Both you and your employee pay (each covering half). You withhold their portion and match it dollar-for-dollar.
What is FICA?
FICA stands for the Federal Insurance Contributions Act, and it’s the law requiring both employers and employees to contribute to Social Security and Medicare. Every time you run payroll, a slice of those wages flows toward two federal programs: one that funds retirement and disability benefits, and one that funds healthcare for older Americans.
It’s not optional, it’s not something you can defer, and it applies to every W-2 employee on your payroll.
Both the Employer and the Employee Pay
A lot of new business owners assume FICA is just something you withhold from an employee’s paycheck. It’s not. You match it.
Here’s the breakdown:
| Employee pays | You pay | |
| Social Security | 6.2% | 6.2% |
| Medicare | 1.45% | 1.45% |
One important detail: Social Security has an annual wage base limit. Once an employee’s earnings cross that threshold, you stop withholding Social Security for the rest of the year. The IRS updates this number annually. As of 2026, only the first $184,500 of your earnings are subject to the Social Security tax.
Medicare has no cap for the standard 1.45% rate.
FICA Calculation Example
Say an employee earns $3,000 this pay period and hasn’t hit the Social Security wage base yet.
Social Security: $3,000 × 6.2% = $186 withheld from employee, $186 from you
Medicare: $3,000 × 1.45% = $43.50 withheld from employee, $43.50 from you
Total withheld from employee: $229.50 Total you contribute: $229.50 Total sent to the IRS: $459
That’s it. The math itself is simple, but the responsibility around it is what gets business owners into trouble.
High Earners Trigger an Extra Medicare Tax
If an employee’s wages cross certain IRS thresholds during the year, you’re required to withhold an additional 0.9% Medicare tax on earnings above that amount. The key difference: you don’t match the extra 0.9%. That’s the employee’s tab alone.
As of 2026, that threshold is $200,000 for single filers, $250,000 for joint filers, and $125,000 for married filing separately.
Withholding the Employee’s Portion
Calculating FICA is actually the easy part. What matters just as much is what happens next: withholding the employee’s portion correctly from each paycheck, matching it with your own contribution, depositing everything on your required IRS schedule, and filing Form 941 quarterly to report it all.
The IRS treats payroll taxes as “trust fund” taxes because you’re temporarily holding your employee’s money before sending it in. Miss a deposit or file late, and penalties stack up fast. Do not save this for the later. The more you put it off, the more it adds up.
Does FICA Apply to Contractors?
If you work with true independent contractors (people you pay on a 1099), FICA doesn’t apply the same way. You don’t withhold anything from their pay. Instead, they handle self-employment tax on their own returns, which covers their Social Security and Medicare under a different structure.
One word of caution: misclassifying employees as contractors to sidestep payroll taxes is one of the fastest ways to end up in a dispute with the IRS. If someone looks and works like an employee, treat them like one.
Work With JBS Corp
FICA taxes aren’t complicated to calculate. But payroll compliance (making sure the right amounts are withheld, deposited, and reported on time) is where small mistakes quietly compound, especially as you grow.
If you’re not completely confident your payroll setup is correct, or you just want a second set of eyes on it, we’re happy to help. At JBS, we’ve worked with business owners on payroll tax compliance and broader tax strategy for 20 years, entirely remotely and nationwide.
This article is for educational purposes only. Tax rules change frequently, and your situation may require individualized guidance.
