Do Employers Pay FICA? Rates, Wages, and Penalties

Yes. Employers do pay FICA. Federal law requires every employer to pay a tax equal to 6.2 percent of covered wages for Social Security and 1.45 percent for Medicare — a combined 7.65 percent — on top of withholding the same 7.65 percent from each employee’s paycheck.¹² The employer’s share is a separate business expense paid from company funds, not a deduction from the worker’s wages, which is why it often catches new employers off guard.

How the Employer’s Share Works

FICA funds two federal programs. The 6.2 percent Social Security portion pays for Old-Age, Survivors, and Disability Insurance (OASDI). The 1.45 percent Medicare portion pays for Hospital Insurance for people 65 and older and certain individuals with disabilities.² The employer’s rates mirror what employees pay, so each dollar an employee contributes is matched dollar for dollar by the company.³

Take an employee earning $60,000 a year. The employer owes $3,720 in Social Security tax (6.2 percent of $60,000) plus $870 in Medicare tax (1.45 percent of $60,000), for a total of $4,590 on top of the salary itself. The good news for the business is that the employer’s FICA contributions are deductible as an ordinary business expense on the company’s federal income tax return.

The Social Security portion has an annual ceiling. For 2026, the wage base is $184,500.⁴ Once an employee’s year-to-date wages cross that line, neither the employer nor the employee owes the 6.2 percent Social Security tax on any further earnings that calendar year.⁵ The cap adjusts each year with average wage growth.

Medicare works differently. There is no wage base. The employer owes 1.45 percent on every dollar of wages, no matter how high the employee’s earnings climb.² For high earners, the employer’s Medicare obligation keeps running all year even after Social Security withholding stops.

Employers are also legally responsible for collecting the employee’s half through payroll withholding and sending it to the IRS. If a company fails to withhold the employee’s share, the employer becomes personally liable for that amount too.⁶

The Additional Medicare Tax: Withhold, Do Not Match

An extra 0.9 percent Medicare tax applies to individual wages above $200,000 in a calendar year. Employers must start withholding it in the pay period when the employee’s year-to-date wages pass $200,000, regardless of the employee’s filing status.⁷

This piece is different from the rest of FICA in one important way for employers: there is no employer match. The 0.9 percent is entirely the employee’s obligation. The company only withholds and remits it.⁷ Employees whose household income triggers the tax at a lower threshold — for instance, $250,000 for married couples filing jointly — reconcile the difference on their personal return.

Which Wages Trigger the Employer’s FICA

Not every dollar an employer hands to a worker counts as FICA wages, and the distinction directly affects how much the company owes.

Salary, hourly pay, bonuses, commissions, and tips are generally subject to FICA. Several common forms of compensation fall outside the tax base:

Premiums an employer pays for accident and health coverage are not FICA wages.
Salary-reduction contributions to a Section 125 cafeteria plan — health insurance premiums, HSA contributions, and similar qualified benefits — are typically excluded.⁸
The first $50,000 of group-term life insurance coverage is excluded; anything above that is FICA wages.⁸
Dependent care assistance up to $5,000 is excluded; amounts above that are wages for FICA.⁸

Structuring compensation to include FICA-exempt benefits can lower payroll tax costs for the employer and the employee at the same time.

Workers the Employer Does Not Match On

An employer does not owe the matching FICA share on wages paid to certain exempt workers. The main categories:

Students enrolled and regularly attending classes at a college or university who work for that same institution, provided they are at least half-time and the work is incidental to their studies. Professional employees who happen to be students do not qualify.⁹
Members of recognized religious sects that are conscientiously opposed to insurance benefits, if both the employee and employer belong to the sect and the sect has existed continuously since December 31, 1950. The exemption is claimed on Form 4029.¹⁰
Foreign students, scholars, and trainees on F, J, M, or Q visas, on wages earned while performing services related to the purpose of their visa.¹¹
Federal employees hired before 1984, who are exempt from the Social Security portion but still owe Medicare tax.¹¹

Reporting and Depositing the Employer’s Share

Most employers report FICA on Form 941, the Employer’s Quarterly Federal Tax Return, which shows total wages, employee withholding, and the employer’s matching share for each quarter.¹² Very small employers whose total annual liability for Social Security, Medicare, and withheld federal income tax runs $1,000 or less can file Form 944 once a year instead.¹³

Filing a return and depositing the money are separate deadlines. All deposits go through the Electronic Federal Tax Payment System.¹⁴ How often you deposit depends on your total tax liability during a lookback period. If liability during the lookback period was $50,000 or less, you deposit monthly, by the 15th of the following month. If it exceeded $50,000, you deposit semiweekly.¹¹ Any day on which accumulated taxes reach $100,000 triggers a next-business-day deposit for the full amount.¹⁵ New employers are treated as monthly depositors during their first calendar year.

Employers also report each employee’s annual wages and withholding on Form W-2 and transmit copies to the Social Security Administration. For the 2026 tax year, Forms W-2 and W-3 are due to the SSA by February 1, 2027, on paper or electronically.¹⁶ Employers filing a combined total of 10 or more information returns during the year must file electronically.¹⁷

Penalties When Employers Do Not Pay

Late deposits carry escalating percentage penalties on the unpaid amount:¹⁸

1 to 5 calendar days late: 2 percent
6 to 15 calendar days late: 5 percent
More than 15 calendar days late: 10 percent
More than 10 days after the first IRS notice, or upon a demand for immediate payment: 15 percent

The tiers do not stack. A deposit more than 15 days late owes 10 percent total, not the sum of the earlier tiers.¹⁸

Willful conduct raises the stakes sharply. Under the Trust Fund Recovery Penalty, any person responsible for collecting and paying over employment taxes — usually a business owner, officer, or payroll manager — can be held personally liable for a penalty equal to 100 percent of the unpaid tax.¹⁹ The IRS can pursue the responsible individual’s personal assets even if the business itself is a corporation or LLC. Willful failure to collect and pay over FICA taxes is also a federal felony, punishable by a fine of up to $10,000, up to five years in prison, or both.²⁰

What FICA Is Not: FUTA and Self-Employment Tax

Two related taxes get confused with the employer’s FICA share, and they are separate obligations.

The Federal Unemployment Tax Act (FUTA) funds federal unemployment insurance and is paid entirely by the employer, with no employee share. The FUTA rate is 6.0 percent on the first $7,000 of each employee’s wages per year. Employers who pay into their state unemployment fund generally receive a credit of up to 5.4 percent, dropping the effective FUTA rate to 0.6 percent.²¹ FUTA is reported on Form 940, not on Form 941.

Self-employed people — sole proprietors, freelancers, and most partners in a partnership — have no employer to split FICA with. They pay the full 15.3 percent themselves as self-employment tax under the Self-Employment Contributions Act: 12.4 percent for Social Security and 2.9 percent for Medicare.²² The same $184,500 Social Security wage base and the 0.9 percent Additional Medicare Tax apply. If a business hires people as independent contractors, it does not owe an employer FICA match on those payments — but if the IRS later reclassifies those workers as employees, the business can be assessed back FICA (both halves), penalties, and interest.

1
Office of the Law Revision Counsel. 26 USC 3111 – Rate of Tax
2
Internal Revenue Service. Topic No. 751, Social Security and Medicare Withholding Rates
3
Office of the Law Revision Counsel. 26 USC 3101 – Rate of Tax
4
Social Security Administration. Maximum Taxable Earnings
5
Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security?
6
Office of the Law Revision Counsel. 26 USC 3102 – Deduction of Tax From Wages
7
Internal Revenue Service. Topic No. 560, Additional Medicare Tax
8
Internal Revenue Service. FAQs for Government Entities Regarding Cafeteria Plans
9
Internal Revenue Service. Student FICA Exception
10
IRS.gov. Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits
11
Internal Revenue Service. Publication 15 (2026), Employer’s Tax Guide
12
Internal Revenue Service. About Form 941, Employer’s Quarterly Federal Tax Return
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Internal Revenue Service. About Form 944, Employer’s Annual Federal Tax Return
14
Internal Revenue Service. EFTPS: The Electronic Federal Tax Payment System
15
Internal Revenue Service. Employment Tax Due Dates
16
Internal Revenue Service. General Instructions for Forms W-2 and W-3
17
IRS.gov. 2026 General Instructions for Forms W-2 and W-3
18
Internal Revenue Service. Failure to Deposit Penalty
19
Office of the Law Revision Counsel. 26 USC 6672 – Failure to Collect and Pay Over Tax, or Attempt to Evade or Defeat Tax
20
Office of the Law Revision Counsel. 26 USC 7202 – Willful Failure to Collect or Pay Over Tax
21
Internal Revenue Service. Topic No. 759, Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return – Filing and Deposit Requirements
22
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)