Question

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion, each portion of which is imposed on the same base amounts.

A) True
B) False

Answer 1

The calculation of FICA and the self-employment tax both involve two components: the Social Security portion and the Medicare portion, and each portion is imposed on the same base amounts.

Step-by-step explanation:

True. The calculation of FICA (Federal Insurance Contributions Act) and the self-employment tax both involve two components: the Social Security portion and the Medicare portion. Each portion is imposed on the same base amounts, with the employee and employer splitting the payroll taxes. The Social Security tax is 6.2% of the employee's gross income, while the Medicare tax is 1.45% of the employee's gross income.

For example, if an employee earns $50,000 in gross income, they would contribute $3,100 (6.2% of $50,000) towards Social Security and $725 (1.45% of $50,000) towards Medicare.