Greger Peterson is a senior manager at a public accounting firm making a base salary of $180,000 a year ($15,000 per month).Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum.Assuming the Social Security maximum base amount is $118,500,through what month will Social Security be withheld?
A)Social Security will be withheld through the month of August.
B)Social Security will be withheld through the entire year.
C)Social Security will be withheld through the month of January.

Question

Quizplus · Accepted Answer

The maximum amount of Social Security tax that can be withheld for the year is $7,347 ($118,500 x 6.2%). This amount is usually withheld evenly throughout the year until it reaches the maximum, at which point it stops being withheld. Given that the employee's base salary is $180,000, the maximum Social Security tax will be reached by the end of August ($7,347 / $15,000 per month = 0.49, which rounded up means that the maximum amount will be reached by the end of the 8th month). Therefore, Social Security will be withheld through the month of August.

Greger Peterson Is a Senior Manager at a Public Accounting