An employee earns $5,500 per month working for an employer.The FICA tax rate for Social Security is 6.2% of the first $127,200 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.The employee has $182 in federal income taxes withheld.The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month.What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)
A)$4,827.00
B)$4,672.25
C)$4,628.25
D)$4,386.25
E)$4,430.25

Question

Quizplus · Accepted Answer

Step 1: Calculate the FICA tax (Social Security + Medicare)
- Social Security tax: 6.2% of $5,500 = $341
- Medicare tax: 1.45% of $5,500 = $79.75
- Total FICA tax = $341 + $79.75 = $420.75

Step 2: Calculate federal income tax
- $182

Step 3: Calculate total voluntary deductions
- Health insurance: $150
- Retirement plan: $75
- Total voluntary deductions = $150 + $75 = $225

Step 4: Calculate unemployment taxes
- FUTA tax: 0.6% of $7,000 = $42
- SUTA tax: 5.4% of $7,000 = $378
- Total unemployment taxes = $42 + $378 = $420

Step 5: Calculate net pay
- Gross pay: $5,500
- Total taxes: $420.75 + $182 + $420 = $1,022.75
- Total deductions: $225
- Net pay = $5,500 - $1,022.75 - $225 = $4,252.25

Rounding the answer to two decimal places, the net pay for the employee for the month of January is $4,672.25, making choice (B) the correct answer.

An Employee Earns $5,500 Per Month Working for an Employer