Successful Salon & Spa Management Practice Test

FICA stands for the Federal Insurance Contribution Act, which is a crucial piece of legislation in the United States that governs the taxation used to fund Social Security and Medicare. Under FICA, employers and employees contribute a percentage of their earnings to provide benefits for individuals who retire, become disabled, or qualify for Medicare.

The name of the act reflects its purpose: it is a federal requirement for contributions that help provide insurance benefits to individuals. Understanding this act is essential for payroll management in any salon or spa, as it directly affects employee wages and the business's tax obligations. Proper knowledge of FICA ensures compliance with federal regulations and the right handling of payroll taxes, which is vital for the financial health of the business and for maintaining trust with employees regarding their benefits.

The other options do not represent established legislation regarding payroll taxes and may cause confusion about the necessary compliance required for businesses in managing employee taxes.