Question

Solve the following problems using 6.2%, up to $128,400 for social security tax and 1.45% for medicare tax. what are the social security withholdings for an executive whose annual gross earnings are $138,500?

Answer 1

The Social Security withholdings for an executive with an annual gross income of $138,500 would be $7,960.80, calculated as 6.2% of the capped amount of $128,400 for Social Security taxes.

Step-by-step explanation:

To calculate the Social Security withholdings for an executive whose annual gross earnings are $138,500, we must remember that the Social Security tax rate is 6.2% only up to the income limit of $128,400 for the year in question. Therefore, the Social Security tax will not be calculated on the entire $138,500, but instead on the maximum capped amount of $128,400.

Here is the calculation:

• Social Security Tax = 6.2% of $128,400
• Social Security Tax = 0.062 * $128,400
• Social Security Tax = $7,960.80

Thus, the Social Security withholdings would be $7,960.80 for this executive.