An employee earns $4,000 gross pay per month. What is the total FICA tax (employer and employee combined) for this employee?
Correct Answer
C) $612
FICA tax is 7.65% each for employer and employee (15.3% total). $4,000 × 15.3% = $612 total FICA tax. Employee pays $306 and employer matches $306.
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 employee and employer pay this rate, making the combined total 15.3%. When applied to the $4,000 gross pay ($4,000 × 15.3% = $612), this represents the total FICA tax burden split equally between employer and employee. The question specifically asks for the combined total, not just one party's contribution.
Why the Other Options Are Wrong
Option A: $248
This amount is too low and doesn't match any component of the FICA tax calculation for $4,000 gross pay.
Option B: $306
This amount doesn't correspond to any standard FICA calculation and appears to be an arbitrary distractor.
Option D: $124
This represents only the employee's portion of FICA tax ($4,000 × 7.65% = $306), but the question asks for the total combined employer and employee FICA tax.
Memory Technique
Remember 'FICA 15-3': FICA total rate is 15.3% (7.65% × 2 parties). Think 'Fifteen-point-Three for FICA' to remember the combined rate.
Reference Hint
Look up payroll tax calculations in the Business and Finance chapter, specifically the section on employer tax responsibilities and FICA contributions.
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