Federal Insurance Contributions Act
Social Security is funded by payroll taxes collected through the Federal Insurance Contributions Act (FICA), which are commonly referred to as "FICA taxes”. They are what fund Social Security Disability.
The Federal Insurance Contributions Act was enacted in 1935 as a tax provision of the Social Security Act. It is ran by the Internal Revenue Service and appears in the Internal Revenue Code.
It is important to understand the role of Federal Insurance Contributions Act (FICA) taxes because anyone seeking Social Security Disability benefits is required to have, at one point, contributed to Social Security by paying FICA taxes.
In order to be eligible for Social Security Disability benefits, you must have made contributions to the Federal Insurance Contributions Act through payroll deductions in conjunction with your disability. The minimum amount varies widely, depending on age, years worked and wages received. The reason behind the contribution requirement is simple: you cannot expect to collect employment disability if you have never been employed.
For individuals who have never been employable due to a disability from birth or a young age, Social Security Disability benefits are not often paid to a family or caretaker and are based on different standards than those assessed for people who can no longer work due to a mental or physical disability.
Federal Insurance Contributions Act (FICA) taxes are paid by both employees and their employers. The Internal Revenue Service taxes a percentage of wages up to a certain amount. In 2010, the amount of annual taxable income on an individual was capped at $106,800. Employees are taxed 6.2 percent of their yearly wages and employers also are taxed a matching 6.2 percent. The 2010 maximum FICA contribution was $6,621.60.
Federal Insurance Contributions Act (FICA) taxes also fund the federal Medicare program, requiring an additional 1.45 percent tax deducted from payroll wages. The Medicare portion of FICA is also paid for by both employees and employers. The contributions are used to provide health care services to low-income Americans and those over the age of 65.
Federal Insurance Contributions Act taxes are a vital contribution made by every working American and their employer, as these contributions are necessary to fund Social Security Disability and retirement benefits.
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