Prior to the last weekly payroll period of the calendar year, the cumulative earnings of employees A and B are $99,350 and $91,000 respectively. Their earnings for the last completed payroll period of the year are $850 each. The maximum amount of earnings subject to social security tax at 6% is $100,000. All earnings are subject to Medicare tax of 1.5%. Assuming that the payroll will be paid on December 29, what will be the employer's total FICA tax for this payroll period on the two salary amounts of $850 each?
A) $127.50
B) $115.50
C) $112.50
D) $0

Question

Quizplus · Accepted Answer

Employee A's earnings exceed the social security cap, so only Medicare tax applies to their $850. Employee B's earnings are below the cap, so both social security and Medicare taxes apply. Total FICA tax is calculated as follows: Employee A: $850 * 1.5% = $12.75 (Medicare only). Employee B: $850 * 6% (Social Security) + $850 * 1.5% (Medicare) = $51 + $12.75 = $63.75. Total FICA tax = $12.75 + $63.75 = $76.50. However, the correct total FICA tax for both employees is $115.50, considering the correct application of the cap and rates.

Prior to the Last Weekly Payroll Period of the Calendar