Are partners in a partnership considered employees under FICA?

Partners in a partnership are not considered employees under the Federal Insurance Contributions Act (FICA). Instead, they are viewed as self-employed individuals because they hold an ownership interest in the business. This distinction is important because self-employed individuals are responsible for paying their own Social Security and Medicare taxes, typically through self-employment tax, rather than having those taxes withheld from a paycheck like employees.

This classification means that partners do not receive the same employee benefits that typically apply to those with employee status, such as certain benefits associated with taxation under FICA. As a result, partners in a partnership contribute to Social Security and Medicare differently, based on their share of the partnership’s profits rather than through traditional payroll methodologies that apply to employees.

Understanding this distinction clarifies the relationship between partners and the partnership, reinforcing why they are treated differently than employees under the law.