Understanding FICA Tax

The video explains the FICA tax, which funds Social Security and Medicare. It details the tax's components, including the OASDI and Medicare portions, and provides a calculation example for a $100,000 salary. The video also discusses the regressive nature of the FICA tax, highlighting how it affects different income levels and the benefits received.

What does the acronym FICA stand for?

• Federal Internal Contributions Act

• Federal Insurance Contributions Act

• Federal Income Contributions Act

• Federal Investment Contributions Act

Which two programs are funded by the FICA tax?

• Social Security and Medicare

• Social Security and Medicaid

• Medicare and Medicaid

• Medicare and Unemployment Insurance

What percentage of an employee's gross salary is contributed to Social Security by both the employer and employee?

• 6.2%

• 2.9%

• 12.4%

• 15.3%

How much does an employer contribute to Medicare for an employee's gross salary?

• 1.45%

• 2.9%

• 6.2%

• 12.4%

If an employee earns $100,000 annually, how much does the employer pay in total FICA tax for this employee?

• $6,200

• $7,650

• $1,450

• $15,300

What is the total amount an employer must set aside to cover a $100,000 salary and FICA taxes?

• $115,300

• $106,800

• $107,650

• $100,000

Why is FICA tax considered regressive?

• It decreases with higher income

• It increases with higher income

• It remains constant regardless of income

• It only applies to incomes above $200,000

What is the income cap for FICA tax as of 2011?

• $200,000

• $106,800

• $150,000

• $100,000

How does longevity affect the benefits received from FICA tax contributions?

• Longer life results in more benefits

• Longevity has no effect on benefits

• Shorter life results in more benefits

• Longer life results in fewer benefits

What factor is known to influence the longevity of benefit collection from FICA tax?

• Number of dependents

• Age of retirement

• State of residence

• Income level