The Federal Insurance Contribution Act is is a tax consisting of Social Security and Medicare taxes that must be paid by employers and employees. Employers must match employee Social Security and Medicare tax contributions, using the same rate and taxable wage amounts. FICA provides for a federal system of old age insurance (OASI) and health insurance (HI). The Old Age, Survivors, and Disability Insurance is financed by the Social Security Tax. The Health Insurance is financed by the Medicare Tax. Each of these taxes is reported separately on the 941 Form.
With some exceptions, tips received by employees are treated as wages for both the employee's and the employer's share of FICA taxes. On a monthly basis, employees are required to report to their employers in writing all tips received. For the employee's portion of the FICA tax, federal law requires that the employer take into account only those tips that are included in the written report from the employee.
