An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $117,000.The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%.The employee's annual FICA taxes amount is:
A)$2,294.00.
B)$536.50.
C)$2,830.50.
D)$1,757.50.
E)$8,950.50.

Question

Quizplus · Accepted Answer

The Social Security portion of the FICA tax rate is 6.2%, so the employee paid 6.2% of the maximum limit for Social Security, which is $117,000.

$117,000 x 0.062 = $7,254

Since the employee earned $37,000, they only paid Social Security taxes on $37,000 of their income.

$37,000 x 0.062 = $2,294

The Medicare portion of the FICA tax rate is 1.45%, so the employee paid 1.45% on all of their income.

$37,000 x 0.0145 = $536.50

Adding the Social Security tax and Medicare tax together gives us the employee's total FICA tax amount:

$2,294 + $536.50 = $2,830.50

An Employee Earned $37,000 During the Year Working for an Employer