An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $127,200.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

For Social Security, the maximum taxable earnings for 2018 is $127,200, so the employee's taxable Social Security earnings would be $37,000.

The Social Security tax rate is 6.2%, so the employee's Social Security tax would be:

$37,000 * 6.2% = $2,294.00

For Medicare, there is no maximum taxable earnings limit, so the employee's entire earnings of $37,000 would be subject to the Medicare tax.

The Medicare tax rate is 1.45%, so the employee's Medicare tax would be:

$37,000 * 1.45% = $536.50

Adding together the Social Security tax and the Medicare tax, the employee's total FICA taxes amount would be:

$2,294.00 + $536.50 = $2,830.50

Therefore, the best choice is C, $2,830.50.

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