Assuming a FICA tax rate of 7.65% on the first $128,400 in wages, 1.45% on amounts in excess of $128,400, 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 for the year?

Question

Quizplus · Accepted Answer

FICA taxes on first $128,400 = 7.65% x $128,400 = $9,821.40
FICA taxes on amount over $128,400 ($180,000 - $128,400) = 1.45% x ($180,000 - $128,400) = $1,485.60
Total FICA taxes = $9,821.40 + $1,485.60 = $11,307

Federal income tax = 20% x $180,000 = $36,000

Total deductions = $11,307 + $36,000 = $47,307

Net pay = $180,000 - $47,307 = $132,693

Therefore, the correct answer is D ($133,429 is the closest option to the calculated net pay of $132,693).

Assuming a FICA Tax Rate of 7