Assuming a FICA tax rate of 8% on the first $106,800 in wages, 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 $108,000?

Question

Quizplus · Accepted Answer

The FICA tax on the first $106,800 in wages is 8%, which is $8,544 ($106,800 x 8%). However, for the remaining $1,200 ($108,000 - $106,800), there is no FICA tax, so that portion is not deducted. The federal income tax rate of 20% on all wages is $21,600 ($108,000 x 20%). Therefore, the total tax deducted would be $30,144 ($8,544 + $21,600). 
Subtracting this tax amount from the employee's gross pay gives a net pay of $77,856 ($108,000 - $30,144). 
Therefore, the correct choice is D.

Assuming a FICA Tax Rate of 8% on the First