Question

Suppose a college football coach makes a base salary of $2,400,000 a year ($200,000 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Assuming the Social Security maximum base amount is $128,400, how much will be withheld during the year for the coach's Social Security and Medicare taxes?

a. $34,800.
b. $41,422.
c. $183,600.
d. None of these amounts is correct

Answer 1

To calculate the Social Security tax, find the lesser of the base salary and the maximum base amount. For Medicare tax, use the base salary. Add the two amounts to find the total withheld.

Step-by-step explanation:

Calculation of Social Security and Medicare Taxes for the College Football Coach

To calculate the Social Security tax, we need to find the lesser of the coach's base salary and the maximum base amount for Social Security. In this case, the maximum base amount is $128,400. So, the Social Security tax for the coach would be 6.2% of $128,400, which is $7,964.80.

The Medicare tax has no maximum base amount, so we can simply calculate 1.45% of the coach's base salary. 1.45% of $2,400,000 is $34,800.

Therefore, the total amount withheld for Social Security and Medicare taxes during the year would be $7,964.80 (for Social Security) + $34,800 (for Medicare) = $42,764.80.

So, the correct answer is $42,764.80 (option d).

Answer 2

d. None of these amounts is correct

Step-by-step explanation:

The withheld amount during the year for the coach = 6.2% Social Security tax up to a maximum base amount + 1.45% Medicare tax with no maximum

= 6.2% * $128,400*12 + 1.45%* $2,400,000 = $130,330