Tom's gross pay for the month is $2,400. Tom's deduction for federal income tax is based on a rate of 20%. Tom has no voluntary deductions. Tom's yearly pay is under the limit for OASDI. What is the amount of FICA withheld from Tom's pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Question

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First, Tom's federal income tax deduction is 20% of his gross pay, which is 0.20 x $2,400 = $480. This leaves Tom with a net pay of $2,400 - $480 = $1,920.

Next, we need to calculate Tom's FICA withholdings. His FICA-OASDI Tax is 4.2% of his gross pay, which is 0.042 x $2,400 = $100.80. His FICA-Medicare Tax is 1.45% of his gross pay, which is 0.0145 x $2,400 = $34.80.

Therefore, the total FICA withheld from Tom's pay is $100.80 + $34.80 = $135.60. Choice B is the correct answer.

Tom's Gross Pay for the Month Is $2,400