Friday, February 1, 2013

January Paycheck Not What You Expected?

What is “FICA” and why is it making my paycheck smaller?

“FICA” (which stands for "Federal Insurance Contributions Act") refers to the payroll taxes withheld from your salary that fund both the US Social Security and Medicare programs. Employees who are full-time students, nonresident alien students (F-1s/J-1s) and nonresident alien scholars (J-1s in the first two years of their program) do not have to pay FICA taxes.

If you are required to pay FICA taxes, the Medicare contribution is identified as “Fed MED/EE” and the Social Security contribution is identified as “Fed OASDI/EE” on your paycheck. The Medicare contribution is 1.45% of your taxable income. In January 2013, the employee’s share of the Social Security payroll tax was increased to 6.2% of your taxable income due to the expiration of payroll tax cuts which had been in place for the past two years. Previously, the contribution was 4.2%. The result is smaller paychecks for all FICA-eligible wage earners regardless of citizenship or treaty status as no tax treaty will exempt employees’ FICA taxes.

Note: Some of you may have been exempt in 2012 because of your nonresident tax status, but that status may have changed in 2013 and you are paying FICA for the first time.  If you are unsure, check your GLACIER tax summary for information on when you can expect to start paying FICA taxes.