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