A contractor pays an employee $4,200 gross monthly salary. What is the total FICA tax (employer and employee combined) for this employee for the month?
Correct Answer
C) $642.60
FICA tax is 7.65% each for employer and employee (6.2% Social Security + 1.45% Medicare). Total FICA = $4,200 × 0.0765 × 2 = $642.60.
Why This Is the Correct Answer
FICA tax consists of Social Security (6.2%) and Medicare (1.45%) taxes, totaling 7.65% for each party. Both the employer and employee pay this rate, so the combined FICA tax is 15.3% of the gross salary. Calculating $4,200 × 0.153 = $642.60, which represents the total FICA burden for both parties combined.
Why the Other Options Are Wrong
Option A: $321.30
This represents only the employee's portion of FICA tax ($4,200 × 0.0765 = $321.30), but the question asks for the combined employer and employee total.
Option B: $579.60
This amount falls between the employee-only portion and the combined total, suggesting a calculation error or misunderstanding of the FICA rates.
Option D: $289.80
This amount is too low and doesn't correspond to any standard FICA calculation - it appears to be an arbitrary distractor.
Memory Technique
Remember 'FICA 15.3' - FICA combined rate is always 15.3% (7.65% × 2). For quick mental math, think '15 cents per dollar plus a little more.'
Reference Hint
Look up payroll tax calculations in the Business and Finance chapter, specifically the section on employment taxes and FICA requirements.
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