What is FICA? FICA is the term used to describe a program that funds Social Security Disability Insurance, which is one of the largest sources of income for retired persons. The FICA is administered by the Social Security Administration (SSA), an agency of the United States government.
FICA is one of two federal employee retirement plans, the other being Social Security. The FICA program was designed in 1969. The first person to make use of FICA benefits was an employee at a company owned by Richard Nixon. Nixon had created the Social Security Disability Insurance (SSDI) program to cover disabled retired employees of his company. Since then, thousands of other companies have made use of FICA as well.
Social Security Disability Insurance (SSDI) is a retirement program that provides benefits to individuals who are not eligible for Social Security retirement benefits, such as disabled retired employees of major corporations, those with physical or mental disabilities, and certain types of orphans and disabled children. SSDI also pays benefits if the retiree loses his or her job. Most people begin receiving Social Security benefits when they reach the age of 62. However, the program may also be made available for those who were unable to collect Social Security benefits due to a medical condition or accident, among other reasons.
Those interested in qualifying for SSDI benefits should first search for and apply for SSDI online. If you qualify, you will be automatically granted an application for Social Security disability benefits. The application process takes a few weeks to complete and will involve filling out a short application form and submitting it to the SSA.
In addition to SSDI, FICA also provides benefits to disabled and retired employees of certain private health insurance plans, such as Medicare Part A and B, Medicaid, the Indian Health Service, and other private plans. The Federal Employees Health Benefit and Retirement Plan (FEHLPO) are also a type of FICA. The FICA program does not cover any employees of state or local governments, the U.S. Postal Service, the U.S. Department of Defense, or the Internal Revenue Service, since these employees do not have Social Security retirement benefits.
Once you have applied and received Social Security disability benefits from one of these plans, you will receive a check from the plan for a specified amount of time, known as the “allowance” before the FICA kicks in. The allowance begins to build up, which is your responsibility. Your obligation is to pay the FICA taxes on this money. In order to be sure to pay the correct amount on time, you must contact the SSA to find out the exact date that you need to start paying the taxes. The SSA publishes a list of tax deadlines, but you can usually pay your taxes online.
When you complete your FICA taxes, you must have a certain amount of money remaining in your checking account. If you cannot pay your FICA taxes, the SSA will take the money from your account until you pay it off, then deposit it back into your account.
If you receive more than three times your allowance as Social Security benefits, you will most likely qualify to receive a refund from the SSA. You will be responsible for paying all back taxes, plus any interest and penalties on the funds.
If you have been awarded Social Security benefits while working, the SSA will pay these benefits. You can use the amount of your Social Security benefits and the amount of the FICA taxes you paid to calculate how much Social Security you would have received had you not been receiving benefits.
Because Social Security benefits are taxable income, your earned wages are subject to tax. The amount of your Social Security benefits and the amount of the FICA taxes you paid are the determining factors that determine how much Social Security you will receive and therefore how much tax you will owe on these benefits.
Because FICA and SSI are basically two different programs, it is important to make sure that you know the difference between the two. If you are eligible for either, you may qualify to receive some benefit, but may qualify to receive less if you do not qualify for Social Security benefits.