Assuming a FICA tax rate of 7.65% on the first $117,000 in wages and 1.45% in excess of $117,000 and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $180,000? Round all calculations to the nearest dollar.
A) $134,867
B) $133,953
C) $144,000
D) $134,136

Question

Quizplus · Accepted Answer

First, we need to calculate the FICA tax:
- For the first $117,000: $117,000 x 7.65% = $8,950.50
- For the remaining $63,000 ($180,000 - $117,000): $63,000 x 1.45% = $913.50
Total FICA tax: $8,950.50 + $913.50 = $9,864

Next, we need to calculate the federal income tax: 
$180,000 x 20% = $36,000

Finally, we can calculate the net pay for the year: 
$180,000 - $9,864 - $36,000 = $134,136 
Therefore, the best answer is D.

Assuming a FICA Tax Rate of 7