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F•R•I•E•N•D•S fans will recall when Rachel received her first hard-earned paycheck from Central Perk only to find that some guy named “FICA” had taken a decent chunk. Well, FICA is also getting a cut of your pay, likely near 8%, so we want you to know where your money is going…
First off, FICA stands for the Federal Insurance Contributions Act, which established the tax that you and your employer pay to fund the Social Security and Medicare systems that support us in old age. Your employer withholds 1.45% of all your wages for Medicare, 6.2% on your first $118,500 of wages for Social Security (in 2015) and then kicks in a matching amount for each on your behalf.
Knowing that you shouldn’t have the 6.2% withheld for Social Security on more than your first $118,500 of wages is important for those of you that have side gigs or switch jobs mid-year. If you withhold from both jobs, you could end up overpaying. While you can request a refund if you overpay, you can avoid this interest-free loan to the government just by making sure you let your multiple employers know what’s already been withheld.