Feeling FICA

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