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FICA
Also known as Federal Insurance Contributions Act
FICA is the US federal law requiring Social Security and Medicare contributions from wages. Employees and employers each pay a share, while self-employed individuals pay both halves through self-employment tax. Social Security contributions apply up to an annual wage base limit.
In plain terms: The Social Security and Medicare tax on wages, split between employer and employee.
Why it matters
The tax the S-Corporation election is designed to reduce. Non-residents with no US employment are generally outside FICA, though a totalization agreement may determine which country's system applies.
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