An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $128,400.The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%.The employee's annual FICA taxes amount is:
A)$2,294.00.
B)$536.50.
C)$2,830.50.
D)$1,757.50.
E)$8,950.50.

Question

Quizplus · Accepted Answer

The employee will pay Social Security tax on the first $37,000 of their earnings, as it falls below the maximum limit. The amount of Social Security tax paid is 6.2% of $37,000, which is $2,294.00. 
For Medicare, there is no cap on earnings subject to the tax, so the employee will pay 1.45% on the full amount of their earnings, which is $37,000 x 1.45% = $536.50. 
Therefore, the total FICA taxes paid by the employee for the year are $2,294.00 + $536.50 = $2,830.50.

An Employee Earned $37,000 During the Year Working for an Employer