An employee earned $37,000 during the year working for an employer when the maximum limit for Social Security was $118,500 each calendar year. 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

First, we need to find out how much of the employee's income is subject to Social Security taxes. Since the maximum limit for Social Security was $118,500 and the employee only earned $37,000, we know that the full $37,000 is subject to Social Security taxes.

To find the amount of Social Security taxes, we multiply the income subject to Social Security taxes ($37,000) by the FICA tax rate for Social Security (6.2%):

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

To find the amount of Medicare taxes, we multiply the employee's total income ($37,000) by the FICA tax rate for Medicare (1.45%):

$37,000 x 1.45% = $536.50

Finally, to find the employee's total FICA taxes, we add these two amounts together:

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

Therefore, the employee's annual FICA taxes amount is $2,830.50, which is choice letter C.

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