Question

The 2020 Social Security withholding rate is 6.2%. However, this tax is charged on wages up to $137,700 only. What is the Social Security tax on earnings of $60,000?

a) $3,720
b) $3,732
c) $3,720 (capped at $137,700)
d) $60,000 (flat rate)

Answer 1

The Social Security tax on earnings of $60,000 for the year 2020, with a Social Security withholding rate of 6.2%, is $3,720.

Step-by-step explanation:

The question asks about calculating the Social Security tax on an earning of $60,000 given that the 2020 Social Security withholding rate is 6.2%. To solve this, we apply the percentage rate to the earnings, ensuring that the earnings are less than the wage cap for the tax, which is $137,700 in 2020. As $60,000 is less than the cap, the calculation is straightforward:

Social Security tax = $60,000 × 6.2% = $60,000 × 0.062 = $3,720 Therefore, option (a) $3,720 is the correct answer to the question as it reflects the accurate withholding amount for the given earnings.