Question

An employee earned $37,000 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

Answer 1

The Employee's annual FICA taxes amount is = $2830.5

Explanation

                  Earnings of the Employee = $37,000

         Maximum limit of Social security = $118,500

      Social Security tax rate = 6.2%

    Medicare Tax Rate = 1.45%

      Since the Earnings is within the limits, social security tax is calculated on total earnings

Therefore,

                      Social Security tax = $37,000 * 6.2%   = $2,294

                    Medicare Tax = $37,000 * 1.45% = $536.5

          Total FICA Tax amount = $2830.5