Use the 2016 FICA tax rates, shown below, to answer the following question. If a taxpayer is not self-employed and earns $127,000, what are the taxpayer's FICA taxes? Matching Rates Paid by the Employer 7.65% on first $118,500 paid in wages Employee's Rates 7.65% on first $118,500 of income 1.45% of income in excess of $118,500 1.45% of wages paid in excess of $118,500 Self-Employed Rates 15.3% on first $118,500 of net profits 2.9% of net profits in excess of $118,500 FICA taxes are $ (Type an integer or a decimal. Round to the nearest cent as needed.)
Use the 2016 FICA tax rates, shown below, to answer the following question. If a taxpayer is not self-employed and earns $127,000, what are the taxpayer's FICA taxes? Matching Rates Paid by the Employer 7.65% on first $118,500 paid in wages Employee's Rates 7.65% on first $118,500 of income 1.45% of income in excess of $118,500 1.45% of wages paid in excess of $118,500 Self-Employed Rates 15.3% on first $118,500 of net profits 2.9% of net profits in excess of $118,500 FICA taxes are $ (Type an integer or a decimal. Round to the nearest cent as needed.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:**Understanding FICA Tax Rates for 2016**
When calculating FICA taxes, different rates apply depending on whether you are an employee or self-employed. Here's a detailed breakdown using the 2016 tax rates:
### Employee's Rates
- **7.65%** on the first $118,500 of income.
- **1.45%** of income in excess of $118,500.
### Matching Rates Paid by the Employer
- **7.65%** on the first $118,500 paid in wages.
- **1.45%** of wages paid in excess of $118,500.
### Self-Employed Rates
- **15.3%** on the first $118,500 of net profits.
- **2.9%** of net profits in excess of $118,500.
**Example Calculation:**
If a taxpayer is not self-employed and earns $127,000, their FICA taxes would be calculated as follows:
1. Calculate 7.65% of $118,500.
2. Calculate 1.45% of the amount over $118,500 ($127,000 - $118,500).
**Note:** Round the final FICA tax amount to the nearest cent.
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