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
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).
To find the total amount Alan had to pay in FICA taxes, we need to calculate 15.02% of his earnings.
Step 1: Calculate the FICA taxes:
FICA taxes = Earnings * FICA rate
FICA taxes = $22,500 * 0.1502
Step 2: Calculate the result:
FICA taxes = $3,380.25
Therefore, the correct answer is a. $3,379.50.
To calculate the total amount Alan had to pay in FICA taxes, we need to multiply his earnings by the FICA rate of 15.02%.
The equation to calculate FICA taxes is:
FICA tax = earnings * FICA rate
In this case, Alan's earnings were $22,500, and the FICA rate is 15.02%.
Calculating the FICA tax:
FICA tax = $22,500 * 0.1502
FICA tax = $3,378.75 (rounded to the nearest cent)
Therefore, Alan had to pay a total of $3,378.75 in FICA taxes.
The closest option to this amount is option (a) $3,379.50.