FICA taxes consist of Social Security and Medicare taxes, which are both taxed at different rates. In this case, we can calculate the total FICA taxes Alan owed as:
Social Security tax = $22,500 * 12.4% = $2,790
Medicare tax = $22,500 * 2.9% = $652.50
Total FICA taxes = Social Security tax + Medicare tax = $2,790 + $652.50 = $3,442.50
However, we also need to subtract the employer portion of FICA taxes, which is deductible for self-employed individuals. This is calculated as half of the total FICA taxes, or:
Employer portion = ($2,790 + $652.50) / 2 = $1,721.25
So, the final answer is the total FICA taxes minus the employer portion:
Total FICA taxes (for self-employed individuals) = $3,442.50 - $1,721.25 = $1,721.25
Therefore, the correct answer is b. $1,689.75 (rounded to the nearest cent).
Alan is self-employed. He earned $22,500 one year and was taxed at
the FICA rate of 15.02%. What was the total amount he had to pay in
FICA taxes?
a. $3,379.50
b. $1,689.75
c. $1,652.20
d. $3,304.40
1 answer
1 answer