Question

An employee earned $44,100 during the year working for an employer when the maximum limit for Social Security was $118,500. The FICA tax rate for Social Security is 6.2%, and the FICA tax rate for Medicare is 1.45%. The employee's annual FICA taxes amount is:

A. $6,732.00

B. $6,094.00

C. $638.00

D. $3,373.65

E. $2,728.00

Answer 1

The annual FICA taxes for an employee earning $44,100 would be $3,373.65, including both Social Security and Medicare taxes calculated at the respective rates of 6.2% and 1.45%.

Step-by-step explanation:

To calculate an employee's annual FICA taxes, we need to consider both the Social Security and Medicare tax rates. Since the employee's income is below the maximum limit for Social Security, we apply the full 6.2% to their total income of $44,100 for the Social Security portion of FICA taxes. Additionally, we apply a 1.45% tax rate for Medicare on the entire income, as there is no wage limit for Medicare contributions.

The Social Security tax would be 0.062 * $44,100 = $2,734.20. The Medicare tax is calculated as 0.0145 * $44,100 = $639.45. The total annual FICA tax would be the sum of Social Security and Medicare taxes, which equals $2,734.20 (Social Security) + $639.45 (Medicare) = $3,373.65.