Assuming a FICA tax rate of 7.65% on the first $132,900 in wages and 1.45% on wages in excess of $132,900 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.

Question

Quizplus · Accepted Answer

1. Calculate FICA taxes: 
- On the first $132,900: 7.65%*$132,900 = $10,175.85 
- On the remaining $47,100 ($180,000-$132,900): 1.45%*$47,100 = $682.95 
- Total FICA taxes: $10,175.85+$682.95 = $10,858.80

2. Calculate federal income tax: 20%*$180,000 = $36,000

3. Calculate net pay: 
- Gross pay: $180,000 
- FICA taxes: $10,858.80 
- Federal income tax: $36,000 
- Net pay: $180,000-$10,858.80-$36,000 = $133,141.20

Rounded to the nearest dollar, the net pay is $133,150. Therefore, the correct answer is D.

Assuming a FICA Tax Rate of 7