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.
Category: Accounting & Auditing
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