Question

Determine the total annual FICA tax for an annual salary of $165,000. Use $106,800 for maximum taxable earnings.

a.
$901.41
b.
$9,014.10
c.
$1,262.25
d.
$12,622.50

Answer 1

To determine the total annual FICA tax for an annual salary of $165,000, calculate the Social Security tax and Medicare tax. The total FICA tax is $9,014.10.

Step-by-step explanation:

To determine the total annual FICA tax for an annual salary of $165,000, you need to calculate the Social Security and Medicare taxes. The Social Security tax is 6.2% of the gross annual income, while the Medicare tax is 1.45% of the gross annual income.

First, calculate the Social Security tax by multiplying $106,800 (the maximum taxable earnings) by 0.062. The result is $6,621.60. Since the salary exceeds the maximum taxable earnings, the total Social Security tax is $6,621.60.

Next, calculate the Medicare tax by multiplying $165,000 by 0.0145. The result is $2,392.50. The total FICA tax is the sum of the Social Security and Medicare taxes, which is $6,621.60 + $2,392.50 = $9,014.10. Therefore, the correct answer is option b) $9,014.10.

Answer 2

The Federal Insurance Contributions Act (FICA) requires employers to withhold a certain percentage of an employee's income as tax. The categories are: 6.2% as social security tax 1.45% as Medicare tax 0.9% as Medicare surtax for employees earning more than $200,000 In this case, the percentage of tax applied will be 6.2 + 1.45 = 7.65% The FICA tax will be 165,000 * 0.0765 FICA tax = $12,622.50