The
Definition Of

FICA Taxes

In 1937 Congress enacted the Federal Insurance Contribution Act (FICA). FICA taxes are designed to provide workers with supplemental retirement, employment disability, and medical benefits. In 1965, Congress extended benefits to include Medicare for individuals over 65 years of age. The benefits are financed by a tax levied on employee’s earnings. FICA taxes are commonly referred to as Social Security taxes.

The taxes are usually accured at the time the company records the payroll, by debting Payroll Tax Expense and crediting separate liability accounts for each type of tax.

Share it:

More from this Section

  • Depletion
    The allocation of the cost of natural resources to expense in a rational and systematic manner over the resources to expense in a rational and systematic manner over...
  • Direct labor
    The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is called direct labor.
  • Debenture bonds
    Debenture bonds also known as unsecured bonds issued against the general credit of the borrower.
  • Errors of principles
    Errors of principles refers such errors arise when the entries are not recorded according to the fundamental principles of accountancy,
  • Useful life
    Useful life is an estimate of the expected productive life, also called service life, of the asset. Useful life may be expressed in terms of time, units of activity...
  • Retailers & Wholesalers
    Merchandising companies that purchase and sell directly to consumers are called retailers.Merchandising companies that sell to retailers are known as wholesalers.
  • Owner’s equity statement
    Owner’s equity statement is a financial statement that summarizes the changes in owner’s equity for a specific period of time. The time period is the same as that covered...