BPA Payroll Accounting Practice Test

Both the employee and employer contribute to Medicare and Social Security taxes. This is a fundamental aspect of the U.S. payroll tax system. The contributions are typically deducted from an employee's paycheck, while the employer matches that amount. This means that for every dollar an employee pays into Social Security and Medicare, the employer contributes an equal amount.

This system is designed to ensure that both parties share the responsibility for funding these crucial social safety nets. Employees benefit from these programs through future access to retirement benefits, disability insurance, and healthcare for seniors, while employers facilitate this funding through payroll deductions.

Independent contractors, on the other hand, do not fit into this framework in the same way, as they are considered self-employed and responsible for paying both the employee and employer portions of these taxes themselves. Thus, the joint contribution from both employees and employers is what distinguishes the payroll tax system for traditional employment arrangements.