During 2018, Lee Corporation paid Nicole a salary of $118,000 and a bonus of $20,000. How much (rounded to the nearest dollar) is Lee Corporation required to withhold from Nicole's compensation for her share of FICA taxes?

Question

Quizplus · Accepted Answer

FICA taxes consist of Social Security and Medicare taxes. For 2018, the Social Security tax rate is 6.2% on the first $128,400 of wages, and the Medicare tax rate is 1.45% on all wages. Therefore, the total FICA tax rate on Nicole's salary and bonus is 7.65% (6.2% + 1.45%). The amount of FICA taxes that Lee Corporation is required to withhold from Nicole's compensation is calculated as follows:

FICA taxes = (salary + bonus) x FICA tax rate
FICA taxes = ($118,000 + $20,000) x 0.0765
FICA taxes = $9,962.50

Rounding to the nearest dollar, the answer is C: $9,962.

During 2018, Lee Corporation Paid Nicole a Salary of $118,000