Asteria earned a $27,500 salary as an employee in 2020. How much should her employer have withheld from her paycheck for FICA taxes? (Round your answer to the nearest whole dollar amount.)

Question

Quizplus · Accepted Answer

FICA taxes include Social Security and Medicare taxes. In 2020, the Social Security tax rate was 6.2% on the first $137,700 of income, and the Medicare tax rate was 1.45% on all income.

For Asteria's salary of $27,500, the amount of Social Security tax withheld would be 6.2% of $27,500, which is $1,705. However, there is a Social Security wage base limit of $137,700, so any income above that amount is not subject to the Social Security tax. Since Asteria's income is below the wage base limit, the full amount of $1,705 should be withheld for Social Security taxes.

The Medicare tax rate of 1.45% applies to all income, so the amount withheld for Medicare taxes would be 1.45% of $27,500, which is $399.

Therefore, the total amount that Asteria's employer should have withheld from her paycheck for FICA taxes is $1,705 + $399 = $2,104. Rounded to the nearest dollar, the answer is C) $2,104.

Asteria Earned a $27,500 Salary as an Employee in 2020