What is the term for the U.S. federal payroll tax imposed on both employees and employers to fund Social Security and Medicare?

• A. Federal Insurance Contributions Act (FICA)
• B. Federal Unemployment Tax Act (FUTA)
• C. Social Security Tax
• D. Medicare Tax

Answer: (A)

The concept here is the formal name for the payroll tax that funds Social Security and Medicare and is contributed by both employees and employers. That term is the Federal Insurance Contributions Act, shortened to FICA. FICA covers the two parts: Social Security tax and Medicare tax, which are withheld from employees and matched by employers. The other options refer to either just one component (Social Security Tax or Medicare Tax), or to a different levy altogether (FUTA is the unemployment tax paid by employers). So FICA is the correct, all-encompassing term for this payroll tax.