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 tax and Medicare tax. In 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. The bonus is subject to a flat rate of 22% for federal income tax withholding.

Social Security tax = $118,000 x 6.2% = $7,316 (capped at $7,960.80 for 2018)
Medicare tax = ($118,000 + $20,000) x 1.45% = $2,319.50
Total FICA tax = $7,960.80 + $2,319.50 = $10,280.30
However, since the Social Security tax is capped, the correct answer is C) $9,962.

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