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Feeling FICA

What does FICA stand for?FICA stands for Now, after the excitement settles down
the Federal Insurance Contributions Act. we must decide what to do with our extra
The history of the act reverts back to income. Let's pretend we work a part
the year 1935, when the government time job, because we are still studying
implemented the social security program. to get our degree in economics.
A provision to include social security Fortunately, we have a decent job paying
taxes was included in this act. However, $11 bucks an hour assisting an up and
due to concerns over the coming lawyer. Typically, we put in a 25
constitutionality of the 1935 act, there hour work week, meaning we make about
were amendments made and the provision $275 a week. That is exactly $1100
for collecting social security taxes was dollars every month. If we made $1100
moved to the Internal Revenue Code in every month, the FICA taxes we would
1939. At this time it was renamed the normally contribute would break down like
Federal Insurance Contributions Act.What this:Social Security: $1100 X 6.2% =
is FICA exactly?The Federal Insurance $68.20
Contributions Act authorizes the IRS to Medicare: $1100 X 1.45% =
collect taxes for the benefit of the $15.95$84.15So by not having to pay
social security program. Intuitively, we taxes, particularly FICA, we would
might think of these taxes as social increase our cash flow by $84.15 each
security taxes, but more commonly they month. Now the fun begins. What are the
are referred to as FICA taxes. These ways we could spend our hard earned cash.
FICA taxes serve as deposits into the I know what I would do. I would begin
federal social insurance program we think by signing a lease agreement with TiVO
of today as Social Security.According to for one of their popular digital video
FICA, you must contribute 12.4 percent of recording options. With this contract, I
your earned income up to the allocate $12.95 of my savings each month
predetermined limit of contributions, and to the TiVO service. To complement my
another 2.9 percent must be contributed new DVR, I would go ahead and splurge on
to Medicare. It is important to note the best cable TV service in the area. I
that there is no earnings limit on the estimate the cost would come in around
Medicare portion of the tax, and thus in $50 a month. As a college student I would
practice one is taxed 2.9 percent of all likely be coerced into filling the music
earned income, regardless of your total void in my life by signing up for an all
income level.For those working for hourly you can consume digital music
wages the tax levels are different. subscription service, running
Hourly employees contribute 6.2 percent approximately $9.95 a month. Just like
for Social Security and 1.45 percent for that I am only left with about $10 a
Medicare. Hopefully you noticed that month, which could easily be spent seeing
this is just half of the standard rates. a one or two movies every month.Snap Back
There is good reason for this as your to RealityWell, unfortunately life is not
employer is required to pay the other that easy. We do have to pay FICA, and
half of the rate for Social Security and the contributions we make go a long way
Medicare contributions. In other words, in improving the living conditions of
for those working at hourly wages, the others. So for now, plan on paying those
employer must match the employee FICA taxes, or should I say
contributions.How would you spend your contributions.Adam Smith is a client
FICA?Let's imagine we live in a perfect account specialist with - More Visitors.
world, and we don't have to pay taxes. More Buyers. More Revenue.
That means no more contributions to FICA.




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