For 2024, what is the combined FICA tax rate that must be withheld from employee wages?
Correct Answer
A) 7.65%
The combined FICA rate is 7.65%, consisting of Social Security tax at 6.2% plus Medicare tax at 1.45%. This amount is withheld from employee wages, with the employer paying an additional matching amount.
Why This Is the Correct Answer
Option B (7.65%) is correct because FICA consists of two components that are withheld from employee wages. The Social Security tax rate is 6.2% and the Medicare tax rate is 1.45%. When combined, these two rates total 7.65% (6.2% + 1.45% = 7.65%). This is the amount that must be withheld from each employee's wages, with the employer paying an additional matching 7.65%.
Why the Other Options Are Wrong
Option B: 6.2%
15.3% represents the total FICA tax burden (both employee and employer portions combined). However, the question asks specifically for the rate withheld from employee wages, which is only half of this total amount.
Option C: 1.45%
1.45% represents only the Medicare portion of FICA taxes, not the complete FICA withholding rate. This omits the Social Security tax component of 6.2%.
Memory Technique
Remember 'FICA 7-6-5': 7.65% total, with 6.2% for Social Security and 1.45% for Medicare. The digits 7, 6, and 5 appear in both the total rate and the breakdown.
Reference Hint
Look up payroll tax requirements in the Business and Finance Law chapter, specifically the section on federal tax withholding requirements and FICA obligations.
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