The FICA tax for 2009 consists of the Social Security tax of 6.20% on the first $106,800 of an employee’s taxable earnings (wages, salary, cash bonus, etc.) plus the Medicare tax of 1.45% on every dollar of an employee’s 2009 taxable earnings. In other words, there is no employee earnings limit on the Medicare tax.

The FICA tax of 7.65% (6.20% + 1.45%) on the first $106,800 of an employee’s earnings is withheld from an employee’s pay and is also matched by the employer. Therefore, the total amount to be remitted by the employer is 15.3% of each employee’s first $106,800 of earnings in 2009 plus the Medicare tax of 2.90% of the employee’s earnings above $106,800.

To illustrate the FICA tax, let’s assume that a company has only one employee. During the year 2009 the employee has wages of $50,000. The FICA tax withheld from the employee will be the Social Security tax of 6.20% + the Medicare tax of 1.45% for a total of 7.65% x $50,000 = $3,825. The employer must match the $3,825 and remit a total of $7,650 for this employee. The employer’s matching of $3,825 will be recorded as a payroll expense or as part of the company’s fringe benefit expense.

Now let’s assume that another company has only one employee whose salary in 2009 is $120,000. The FICA tax withheld from this employee will consist of the Social Security tax of $6,621.60 (6.20% x $106,800) plus the Medicare tax of $1,740 (1.45% X $120,000) for a total of $8,361.60. The calculation could also be computed as: ($106,800 x 7.65% = $8,170.20) plus ($120,000 – $106,800 = $13,200 x 1.45% = $191.40) resulting in the same total of $8,361.60. The employer is required to match the $8,361.60 and must remit $16,723.20. The employer’s matching of $8,361.60 becomes an additional payroll related expense for the company.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years. He is the creator and author of all the content found on AccountingCoach.com. You can read 1,500 testimonials praising his ability to explain accounting in a way that anybody can understand.

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