Question

Brooke, a single taxpayer, works for Company A for all of 2018, earning a salary of $72,000. a. a. What is her FICA tax obligation for the year?

Answer 1

FICA includes two taxes

1. Social security tax
2. Medicare tax

Social security is taxable at 6.2% of income for an employee and 12.4% for self employed person

Whereas Medicare is taxable at 1.45% of income for Employees and 2.90% for self employed person.

Brooke is an employee in a company. Tax rate for FICA is (6.2+1.45)7.65%

Taxable income= $72,000

Tax ($72000 x 7.65%)= $5,508.

Don’t get confused by thinking that self employed person pays double tax than employee. For employees , their employer is suppose to deduct half of tax . tax rate are same on both, its just that employees pay half by themselves and other half is paid by employer.