An employee earns $65,000 annually. What is the total Social Security tax (employer and employee portions combined) for this employee for the year?
Correct Answer
D) $8,060
Social Security tax is 6.2% each for employer and employee (12.4% total). $65,000 × 12.4% = $8,060. This assumes the employee's wages are below the Social Security wage base limit.
Why This Is the Correct Answer
Social Security tax is paid by both the employer and employee at 6.2% each, totaling 12.4% combined. When calculating the total Social Security tax burden for an employee earning $65,000, you multiply the annual salary by the combined rate of 12.4%. Since $65,000 is below the Social Security wage base limit (which changes annually but is typically around $160,000), the full amount is subject to Social Security tax, resulting in $8,060 total.
Why the Other Options Are Wrong
Option A: $18,850
This amount is too high and likely represents an error in calculation, possibly doubling the correct answer or including additional payroll taxes beyond Social Security.
Option B: $4,030
This amount appears to include Medicare tax calculations or uses an incorrect tax rate, as it doesn't match either the employee-only portion (6.2%) or the combined portion (12.4%) of Social Security tax.
Option C: $9,425
This represents only the employee's portion of Social Security tax ($65,000 × 6.2% = $4,030), but the question asks for the combined employer and employee portions.
Memory Technique
Remember '6 + 6 = 12' for Social Security: 6.2% employee + 6.2% employer = 12.4% total. Think 'Social Security is SHARED equally between worker and boss.'
Reference Hint
Look up payroll tax rates and Social Security contributions in the Business and Finance chapter or Employment Law section of your contractor reference manual.
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