An employee earns $4,200 gross pay per month. Calculate the total FICA taxes (employee and employer portions combined) for this employee for one month in 2024.
Correct Answer
B) $642.60
FICA rate is 7.65% (6.2% Social Security + 1.45% Medicare) for both employee and employer. Total FICA = $4,200 × 7.65% × 2 = $642.60.
Why This Is the Correct Answer
FICA taxes consist of Social Security (6.2%) and Medicare (1.45%) for a total of 7.65% per person. Since both employee and employer pay these taxes, the total FICA burden is 15.3% of gross wages. For $4,200 gross pay, the calculation is $4,200 × 0.153 = $642.60, which represents the combined employee and employer FICA contributions.
Why the Other Options Are Wrong
Option A: $564.20
This amount appears to be calculated using an incorrect FICA rate, possibly confusing current rates with outdated rates or including incorrect percentages.
Option C: $321.30
This amount ($321.30) represents only the employee's portion of FICA taxes ($4,200 × 7.65%), but the question asks for the total of both employee and employer portions combined.
Option D: $485.10
This amount doesn't correspond to any standard FICA calculation and appears to be based on an incorrect rate or methodology.
Memory Technique
Remember 'FICA 15.3' - FICA total rate is 15.3% when combining both employee and employer portions (7.65% each). Think 'Fifteen point Three for FICA total.'
Reference Hint
Look up payroll tax calculations and FICA rates in the Business and Finance chapter, specifically sections covering employer tax responsibilities and payroll obligations.
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