Florida Building Contractor Business/Finance Practice Exam

Who is responsible for paying FICA taxes?

1. Only the employer

2. Only the employee

3. 50% employer, 50% employee

4. Neither employer nor employee

The correct answer is: 50% employer, 50% employee

FICA, which stands for the Federal Insurance Contributions Act, imposes a payroll tax to fund Social Security and Medicare. This tax is shared between the employer and employee, with each party contributing a specific percentage of the employee's wages. The responsibility for FICA taxes is divided equally: the employer retains a portion of the employee's gross income to cover the employee's share, and then the employer is also required to contribute an equal amount. This ensures that both the employee and employer are contributing to the funding of these essential social programs. Understanding this shared responsibility is crucial for both employers and employees, as it impacts payroll calculations, tax reporting, and overall financial planning in a business. The collaborative nature of FICA contributions reinforces the idea of social safety networks funded by collective contributions, benefiting society at large.