The Federal Insurance Contributions Act, or FICA, is the federal law that authorizes the collection of Social Security and Medicare taxes. Employers are required to withhold both taxes from employees’ paychecks according to the rates set by the government. Social Security has an annual wage limit of $106,800 (as of 2010), but Medicare has none. Consequently, you may notice that Medicare tax is withheld from all of your paychecks. You should know how to calculate your Medicare withholding to ensure you were paid appropriately.
Figure your gross wages—your total pay before any deductions occur. This amount is usually listed on your pay stub as Gross Earnings.
Subtract pretax voluntary deductions from your gross wages, if applicable. Pretax deductions include those that qualify as a cafeteria plan under IRS Section 125 Code. Pretax deductions, such as traditional 401(k) plans and flexible spending accounts, are deducted from gross wages before taxes are withheld. Ask your employer or human resources department for a list of your pretax deductions, if necessary. The remaining amount after you subtract the pretax deduction from your gross wages is your gross taxable wages, which is subject to Medicare withholding.
Calculate Medicare tax at 1.45 percent of your gross taxable wages. Suppose your gross taxable wages for the biweekly pay period is $780. Calculation: $780 x .0145 = $11.31, biweekly withholding. Medicare tax is withheld from all wages.
Non-immigrant and nonresident employees with certain classes of visas, and students who work at a school, college or university at which they are also a student, are exempt from Medicare tax.
- Non-immigrant and nonresident employees with certain classes of visas, and students who work at a school, college or university at which they are also a student, are exempt from Medicare tax.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.