WTF is FICA?
If you are just starting into the workforce, it is best to learn about taxes and deductions. Take a look at your paycheck.
First, let’s talk about Gross Pay vs. Net Pay: “Don’t count your money before you receive it.”
Gross pay is your TOTAL PAY BEFORE TAXES AND DEDUCTIONS (do not count this money into your budgeting)
Net Pay is your TAKE HOME AMOUNT (this is the money you count into your budgeting)
Next, Taxes:
F/W = Federal Withholding (Income Tax) - Your employer takes a certain amount of money out of your paycheck for taxes and sends it to the federal government on your behalf. When tax season comes around and you finish filing, you'll either get a refund or owe additional taxes.
You can request your employer to stop paying Income Tax, but you are then held liable to pay the IRS directly for any taxes you owe.
Medicare = Federal employment tax that funds a portion of the Medicare insurance program. Why do you pay Medicare tax? If you work as an employee in the United States, you must pay social security and Medicare taxes in most cases. Your payments of these taxes contribute to your coverage under the U.S. social security system. Your employer deducts these taxes from each wage payment.
FICA = Federal Insurance Contributions Act (aka Social Security) and is deducted from each paycheck. Your nine-digit number helps Social Security accurately record your covered wages or self-employment. As you work and pay FICA taxes, you earn credits for Social Security benefits. Age 65 is when you stop paying towards FICA.
To get exempt from paying Medicare and Social Security Tax, you must complete Form 4029—Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits from the Internal Revenue Service
There is no guarantee you will be exempt.
Other exemptions may apply (Student Exception to FICA Tax - IRS Website)
Other Deductions or Garnishments may include:
Loan Repayment - Federal loans such as Student Loans may be garnished from your paychecks. Court orders to repay debts can also be deducted from your paychecks.
Child Support - If you have a current order to pay a portion of expenses for children in school, the General Attorney’s office will send the order to your employer to deducted from your wages
Work Related Deductions - Some employers administer fees to help offset some of the cost for recruiting (background checks, drug screes, uniform fee, etc.). Other fees may consist of damage costs incurred during your work hours and/or within your responsibility. These fee are usually covered within a few paychecks depending on the total cost and incremented deduction amount.
Insurance - If you enrolled in medical or other insurance benefits through your employer, they will deducted the costs from your paycheck and forward the payment to the insurance company on your behalf.
