An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 earned each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount of net pay for the employee for the month of January? (Round your intermediate calculations to two decimal places.)

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The correct answer is A.The employee's gross pay is $5,500. The FICA tax for Social Security is $5,500 x 6.2% = $341. The FICA tax for Medicare is $5,500 x 1.45% = $80.25. The FUTA tax is $5,500 x 0.6% = $33. The SUTA tax is $5,500 x 5.4% = $297. The total taxes withheld are $341 + $80.25 + $33 + $297 = $751.25. The employee's net pay is $5,500 - $751.25 - $182 - $150 - $75 = $4,672.25.

An Employee Earns $5,500 Per Month Working for an Employer