What is the total FICA tax (employer and employee combined) on an employee's annual wages of $55,000?
Correct Answer
C) $8,415
FICA tax rate is 7.65% each for employer and employee (15.3% total). Total FICA tax = $55,000 × 15.3% = $8,415.
Why This Is the Correct Answer
FICA tax consists of Social Security (6.2%) and Medicare (1.45%) taxes, totaling 7.65% for each the employee and employer. Since the question asks for the combined total of both employer and employee portions, we multiply the annual wages by 15.3% (7.65% × 2). The calculation is $55,000 × 0.153 = $8,415, making option B correct.
Why the Other Options Are Wrong
Option A: $7,650
This amount appears to be based on an incorrect FICA rate calculation and doesn't match the standard 15.3% combined rate applied to the $55,000 annual wages.
Option B: $3,410
This represents only the employer's portion of FICA tax ($55,000 × 7.65% = $4,207.50), but the question asks for the combined total of both employer and employee portions.
Option D: $4,207.50
This amount is too low and doesn't correspond to any standard FICA calculation - it's neither the single portion (7.65%) nor the combined total (15.3%) of the $55,000 wages.
Memory Technique
Remember 'FICA 15-3': FICA combined rate is 15.3% (sounds like 'fifteen-three'). Also remember 'Split the FICA' - it's always split equally between employer and employee.
Reference Hint
Look up payroll tax requirements in the Business and Finance Law chapter, specifically the section on employer tax obligations and FICA contributions.
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