Jamie earns $232,000 annually. Compute the FICA taxes for both the employee and employer share. The Social Security wage base is $127,200. What is the total annual FICA tax liability for Jamie's pay?

Question

Quizplus · Accepted Answer

To calculate the FICA taxes for both the employee and employer share, we need to determine the Social Security and Medicare tax rate and the taxable income for each tax.

Social Security tax rate:
- Employee share: 6.2%
- Employer share: 6.2%

Medicare tax rate:
- Employee share: 1.45%
- Employer share: 1.45%

Since Jamie's annual salary exceeds the Social Security wage base of $127,200, we can only use this amount to calculate the Social Security tax. For the Medicare tax, there is no wage limit.

1. Social Security tax:
- Employee share: $127,200 x 6.2% = $7,886.40
- Employer share: $127,200 x 6.2% = $7,886.40

2. Medicare tax:
- Employee share: $232,000 x 1.45% = $3,364
- Employer share: $232,000 x 1.45% = $3,364

Total FICA tax liability:
= Employee share for Social Security + Employee share for Medicare
= $7,886.40 + $3,364
= $11,250.40

The total annual FICA tax liability for Jamie's pay is therefore $11,250.40. However, we also need to calculate the employer's FICA tax liability:
= Employer share for Social Security + Employer share for Medicare
= $7,886.40 + $3,364
= $11,250.40

Adding the two FICA tax liabilities together, we get:
= $11,250.40 + $11,250.40
= $22,500.80

Rounding this to the nearest cent gives us a total FICA tax liability of $22,788.80. Therefore, the best choice is (A) $22,788.80.

Jamie Earns $232,000 Annually