An employee earning $55,000 annually works in a state with no state income tax. The employee claims 2 allowances. Which taxes must the employer withhold from the employee's paycheck?
Correct Answer
B) Federal income tax, Social Security, and Medicare only
Employers must withhold federal income tax, Social Security (6.2%), and Medicare (1.45%) from employee paychecks. FUTA and SUTA are employer-paid taxes, not withheld from employees.
Why This Is the Correct Answer
Option B correctly identifies the three taxes that employers must withhold from employee paychecks: federal income tax (based on allowances and tax tables), Social Security tax (6.2% of wages up to the annual wage base), and Medicare tax (1.45% of all wages). Since the state has no state income tax, no state withholding is required. FUTA and SUTA are employer-paid taxes, not employee withholdings.
Why the Other Options Are Wrong
Option A: Federal income tax and FUTA only
This option incorrectly includes FUTA (Federal Unemployment Tax Act), which is an employer-paid tax, not withheld from employee paychecks. It also omits Social Security and Medicare taxes, which are mandatory employee withholdings under FICA.
Option C: Federal income tax, Social Security, Medicare, and SUTA
This option incorrectly includes SUTA (State Unemployment Tax Act), which is an employer-paid tax, not withheld from employee paychecks. While it correctly identifies the three required withholdings, the inclusion of SUTA makes this answer incorrect.
Option D: Social Security and Medicare only
This option omits federal income tax withholding, which is required based on the employee's allowances and applicable tax tables. While Social Security and Medicare are correct, federal income tax is also a mandatory withholding.
Memory Technique
Remember 'FiSM' - Federal income tax, Social Security, Medicare - the three taxes always withheld from employee paychecks. FUTA and SUTA are 'employer extras' that don't come from employee pay.
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