Question

Janice Tax, an accountant for Flee Corp., earned $102,700 from January to June. In July she earned $8,000. Assuming a FICA tax rate of 6.2% for Social Security on $118,500 and 1.45% for Medicare, (A) how much of this month's earnings are taxed for Social Security and Medicare? and (B) what is the amount of FICA tax for Social Security and Medicare?

Answer 1

Explanation:

A. 8,000. She didn’t reach the limit of 118,500 so all is taxable.

b. Social security is 8000 x .062=496

medicare is 8000 x .0145=116

Answer 2

The Federal Insurance Contributions Act (FICA) is made up of two items, Social Security and Medicare taxes. For 2016, the Social Security tax rate is 6.2% on the first $118,500 wages paid. The Medicare tax rate is 1.45% on the first $200,000 and 2.35% above $200,000. Since the total earnings is only $110,700 which is not yet taxable. So there is no taxable earnings yet.