Question

To date, Jay Ward has cumulative earnings of $107,600. This week he is paid $3,000. What is the total amount of Social Security tax for this week? Assume a rate of 6.2% on $110,100 for Social Security and 1.45% for Medicare. A. $186.00 B. $155.00 C. $57.66 D. $180.00

Answer 1

The 'cap' on earnings that can be taxed for Social Security is $ 97,500

The person has already been taxed on $ 95,000 of earnings.

So on this paycheck, only ($ 97,500 - $ 95,000) = $ 2,500 of his earnings are taxable for Social Security.

($ 2,500 x 0.062) = $ 155.00

Answer 2

Option B. $155

Explanation:

Jay Ward has already been taxed on his earning on $107,600.

So on this paycheck only ($110,100 - $107,600) = $2,500 of his earnings are taxable for social security tax.

Social security tax rate = 6.2%

Hence, social security tax amount = 6.2% × 2500

= 0.062 × 2500

= $155

Option B. $155 is the answer.