Assume that social security taxes are payable at a 6% rate on the first $100,000 of earnings and Medicare taxes are payable at a 1.5% rate with no maximum earnings, and that federal and state unemployment compensation taxes total 4.6% on the first $7,000 of earnings. If an employee, George Jones, earns $2,500 for the current week and Jones' year-to-date earnings before this week were $6,800, what is the total payroll taxes related to the current week?
A) $187.50
B) $196.70
C) $344.50
D) $9.20

Question

Quizplus · Accepted Answer

George's year-to-date earnings before this week were $6,800. With the current week's earnings of $2,500, his total earnings become $9,300. Social security tax is 6% on the first $100,000, so $2,500 * 6% = $150. Medicare tax is 1.5% on all earnings, so $2,500 * 1.5% = $37.50. Unemployment taxes are 4.6% on the first $7,000, and since George's earnings before this week were $6,800, only $200 of this week's earnings are subject to unemployment tax, so $200 * 4.6% = $9.20. Adding these gives $150 + $37.50 + $9.20 = $196.70.

Assume That Social Security Taxes Are Payable at a 6