A general contractor has gross payroll of $85,000 for the quarter. What is the total FICA tax amount that must be paid (employer and employee portions combined)?
Correct Answer
A) $13,005.00
FICA tax includes Social Security (6.2%) and Medicare (1.45%) for both employer and employee. Total rate is 15.3% (7.65% × 2). $85,000 × 0.153 = $13,005.00.
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 total combined rate of 15.3% (7.65% × 2 parties). When applied to the gross payroll of $85,000, the calculation is $85,000 × 0.153 = $13,005.00. This represents the total FICA tax burden split equally between employer and employee.
Why the Other Options Are Wrong
Option B: $3,251.25
This amount ($3,251.25) represents only half of the employer's portion, which would be approximately 3.825% of the gross payroll, an incorrect and meaningless rate for FICA calculations.
Option D: $9,775.00
This amount ($9,775.00) would result from using an incorrect tax rate of approximately 11.5%, which doesn't correspond to any standard FICA tax calculation.
Memory Technique
Remember 'FICA 15.3' - Social Security 6.2 + Medicare 1.45 = 7.65 per person, times 2 people (employer + employee) = 15.3% total
Reference Hint
Look up payroll taxes and FICA requirements in the Business and Finance chapter, specifically sections covering employer tax obligations and payroll calculations.
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