What is FICA-OASDI?

What is FICA-OASDI?
Most American citizens are knowledgeable about the different taxes deducted from their paychecks. Those taxes include federal withholding, social security and Medicare. The Federal Insurance Contributions Act, also known as FICA, requires businesses to withhold social security and Medicare from wages earned by their employees. The federal law also requires employers to match the employees’ deductions withheld from earnings. Social Security is another name for OASDI or Old Age, Survivors and Disability Insurance.

According to the Social Security Administration, approximately 96 percent of employees are covered under the OASDI program in the United States. The social security program is designed to provide benefits to retirees and workers with long term disabilities. The workers and retirees are referred to as beneficiaries, and receive monthly supplemental income during retirement or disabilities. If a beneficiary dies, the spouse and surviving children may receive benefits if certain requirements are met.

How are Social Security Collected and Funds Managed?

When an employer deducts social security from an employee’s paycheck, the money is deposited into trust funds, OASDI and Federal Disability Insurance. Social security and Medicare taxes are remitted to the proper reporting agency and deposited into the funds. It is the responsibility of the employer to deduct, report, and remit taxes. Benefit recipients receives payment from the trust funds each month.

Who are Social Security Benefit Recipients?

Social Security benefit recipients are retired workers, disabled employees, children, and deceased worker’s survivors. Nearly all jobs held by citizens and legal immigrants in the United States are covered under the 1935 Social Security Act. OASDI also covers employees working outside the U.S. and legal immigrants who are employed by American businesses. There are certain workers who are exempt from paying social security and Medicare taxes. For an example, workers from other countries who are given permission to work in America or teach are tax exempt.

What are the Eligibility Requirements to Receive Retirement and Disability Benefits?

Social Security Administration has required criteria recipients must meet to be eligible for retirement and disability benefits. The beneficiary must pass yearly earnings tests and be fully insured for retirement benefits. If the beneficiary is disabled, it is the individual’s responsibility to prove disability by providing necessary documents from licensed medical physicians. The beneficiary must be unable to perform job duties as the result of work related injuries or illnesses. The disability must result in death or be long term, one year or longer, to receive benefits.

What is the Type of Social Security Benefits?

The type of social security benefits in the U.S. are retirement, disability, spouse of deceased workers, and surviving children of deceased workers. Workers the age of 62 and older may receive monthly retirement benefits. The spouse and children of workers may also receive retired benefits as well. The child may be biological, adopted, stepchild, and some cases, grandchild or step grandchild. All benefit recipients are required by SSA to meet a list of requirements.

Disability benefits are for workers who are injured while working on the premises of employers. The disabilities must be long term and the recipient must wait five months before payments are issued. If the worker recovers from work related injury or disease and returns to work, the benefits are immediately suspended.

Another type of social security benefit is the survivors of deceased worker. The surviving spouse or widow may receive full benefit at the age 65. If the spouse receives benefits before the age 65, the benefit amount is reduced. The last type of social security benefit is surviving children benefits. Surviving children of deceased beneficiaries are eligible for social security benefits if they are under the age 18. Children are also eligible if they are disabled before the age 22.

Are Social Security Benefits Taxable?

Social security benefits are taxable up to 85 percent. Benefit recipients are required to include disability and retirement benefits as taxable income when filing federal income taxes. The taxes are based on the amount of income and filing status, such as head of household, single, or joint.

Now that you know more about FICA and OASDI, it’s easier to understand why they are taken out of your paycheck and how they are taxed if you happen to be a beneficiary.

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