Question

Mr. Jackson had two jobs in 2005. The first job, in which he earned $74,007 was from January to August, and the second job, in which he earned $35,311 was from August to the end of the year. Because he worked two jobs he over paid his Social Security. How much should he be refunded?

Answer 1

9514 1404 393

Answer:

$1,197.71

Explanation:

The 6.2% Social Security tax applied to the first $90,000 of earnings in 2005, so Jackson is due to be refunded the tax he paid on more than that amount.

6.2% × (74,007 +35,311 -90,000) = 6.2% × 19,318 = $1,197.71

Jackson should receive a Social Security tax refund of $1,197.71.

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Comment on rounding

The tax on 74,007 will be rounded down, as will the tax on 35,311. So, the overpayment value calculated here needs to be rounded down to correspond to the actual to-the-penny amount of overpayment.