What tax is withheld from an employee's check to pay medical bills after retirement?

• A. SSA
• B. FICA
• C. FIT
• D. Medicare Tax

Answer: (B)

Payroll taxes that support government benefit programs are collected under FICA, the Federal Insurance Contributions Act tax. This withholding funds both Social Security and Medicare; Medicare is the health program for medical costs in retirement. So, while Medicare specifically handles medical bills, the label on the payroll deduction is FICA because it covers those programs as a whole. The other options aren’t taxes that fund these benefits: SSA is the Social Security Administration (an agency), and Federal income tax is a separate withholding for general income taxes. Medicare Tax is only the Medicare portion of the FICA tax, whereas FICA is the overall tax that funds both programs.