Question

Review the information and questions below. Provide a detailed 4-5 sentence explanation on how you would solve the problem or issue, based on your own personal experience and/or any additional outside research you perform.

Under the Federal Insurance Contributions Act (FICA) every person is an employer if the person employs one or more individuals for the performance of services in the United States. The Internal Revenue Service (IRS) test for an employer/employee relationship is if a business tells, or has a right to tell a worker how, when, and where to work then the worker is an employee.

During your life you may have noticed many people performing work without paying FICA. What are the concerns from a business perspective and a social perspective on this legally questionable practice?

Please explaining your reasoning.

Answer 1

1) Federal Insurance contributions act is a U.S.law that mandates tax levy on the salaries or wages earned by the employees

2) It is a mandatory payroll tax to be deducted by every employer according to IRS

Concerns from business perspective

1) Non withholding of FICA taxes may lead the business exposed to penalties,Fines and other negative consequences for non compliance of statutory provisions

2) If the IRS founds your failure to pay the payroll taxes. It may lead to criminal penalities including fines which may extend to

               1.$500000

               2.Imprisonment which may extend to a term of 5 years

Concerns from social perspective

1) FICA Taxes so collected are used for noble causes such as

    1.Providing benefits for the retired people,people with disabilities and beneficiaries of deceased people

    2. Medicare is a health insurance program runned by federal government for people above 65 years

Thus the non deduction of taxes under FICA will lead to adverse impact on the society as benefits as specified above will not be extended.