A construction company has gross payroll of $50,000 for the month. What is the total FICA tax obligation (employer and employee combined)?
Correct Answer
A) $7,650
FICA tax includes Social Security (6.2%) and Medicare (1.45%) for both employer and employee. Total rate is 15.3% (7.65% × 2). $50,000 × 0.153 = $7,650.
Why This Is the Correct Answer
FICA tax consists of Social Security tax (6.2%) and Medicare tax (1.45%) that must be paid by both the employer and employee. This creates a combined rate of 15.3% (7.65% × 2 parties). When applied to the gross payroll of $50,000, the total FICA tax obligation is $50,000 × 0.153 = $7,650. This represents the total amount that must be collected and remitted to the government from both parties.
Why the Other Options Are Wrong
Option C: $3,100
This amount ($3,825) represents only half of the total FICA obligation - either just the employer's portion or just the employee's portion (7.65% of $50,000), but the question asks for the combined total obligation.
Option D: $6,200
This amount ($6,200) calculates only the Social Security tax for both employer and employee ($50,000 × 12.4% = $6,200) but omits the Medicare tax portion entirely, which adds another $1,450 to the total obligation.
Memory Technique
Remember 'FICA 15.3' - Social Security 6.2 + Medicare 1.45 = 7.65 per person, times 2 people = 15.3% total. Think 'Fifteen-point-Three for FICA total obligation.'
Reference Hint
Look up payroll tax calculations in the Business and Finance chapter, specifically the section on employment taxes and FICA obligations.
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