Question

Calculate the Social Security for the following employee, Agwali, whose cumulative earnings up to this pay period are $109,200 and gross pay for the pay period is $12,500. Round to the nearest penny;

Answer 1

Based on the information available in the question, we can answer as follows:-

The current tax rate per IRS for Social security for the employer and employee is 6.2% each. As such, the cumulative Social security tax for the employee is 12.4%. Also, per IRS, for the year 2020, the Social security limit is $137,700 per IRS. So all the wages of the employee upto the Gross Income of $137,200 would be taxable for Social security.

Since the gross income of Agwali including the current pay period is $121,700, the entire earnings of the pay period of $12,500 is eligible for social security contribution.

Hence, the social security for the employee is $12,500 * 12.4% = $1,550

Social security for Agwali = $1,550

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