QuestionCalculate Eric Diaz's FICA taxes for August with earnings of \$8600, considering Social Security and Medicare rates.

Studdy Solution

STEP 1

Assumptions1. Eric's year-to-date earnings as of July30 were \$126,200. Eric's earnings during the month of August were \$8,6003. The wage ceiling for Social Security is \$128,4004. The tax rate for Social Security is6.%
5. There is no wage ceiling for Medicare6. The tax rate for Medicare is1.45%

STEP 2

First, we need to find the wage amount subject to Social Security tax. This is the amount of Eric's August wages that is below the Social Security wage ceiling.
$Wage\, subject\, to\, Social\, Security\, tax = min(August\, wages, Social\, Security\, wage\, ceiling - Year-to-date\, earnings)$

STEP 3

Now, plug in the given values for August wages, Social Security wage ceiling, and year-to-date earnings to calculate the wage subject to Social Security tax.
$Wage\, subject\, to\, Social\, Security\, tax = min(\$8,600, \$128,400 - \$126,200)$

STEP 4

Calculate the wage amount subject to Social Security tax.
$Wage\, subject\, to\, Social\, Security\, tax = min(\$8,600, \$2,200) = \$2,200$

STEP 5

Now that we have the wage amount subject to Social Security tax, we can find the Social Security tax deduction. This is done by multiplying the wage subject to Social Security tax by the Social Security tax rate.
$Social\, Security\, tax\, deduction = Wage\, subject\, to\, Social\, Security\, tax \\times Social\, Security\, tax\, rate$

STEP 6

Plug in the values for the wage subject to Social Security tax and the Social Security tax rate to calculate the Social Security tax deduction.
$Social\, Security\, tax\, deduction = \$2,200 \\times6.2\%$

STEP 7

Convert the percentage to a decimal value.
$6.2\% =0.062$ $Social\, Security\, tax\, deduction = \$2,200 \\times0.062$

STEP 8

Calculate the Social Security tax deduction.
$Social\, Security\, tax\, deduction = \$2,200 \\times0.062 = \$136.4$

STEP 9

Next, we need to find the Medicare tax deduction. This is done by multiplying the total August wages by the Medicare tax rate, since there is no wage ceiling for Medicare.
$Medicare\, tax\, deduction = August\, wages \\times Medicare\, tax\, rate$

STEP 10

Plug in the values for August wages and the Medicare tax rate to calculate the Medicare tax deduction.
$Medicare\, tax\, deduction = \$8,600 \\times.45\%$

STEP 11

Convert the percentage to a decimal value.
$.45\% =0.0145$ $Medicare\, tax\, deduction = \$8,600 \\times0.0145$

STEP 12

Calculate the Medicare tax deduction.
$Medicare\, tax\, deduction = \$8,600 \\times0.0145 = \$124.7$

STEP 13

Finally, we can find the total deduction for FICA taxes. This is the sum of the Social Security tax deduction and the Medicare tax deduction.
$Total\, FICA\, tax\, deduction = Social\, Security\, tax\, deduction + Medicare\, tax\, deduction$

STEP 14

Plug in the values for the Social Security tax deduction and the Medicare tax deduction to calculate the total FICA tax deduction.
$Total\, FICA\, tax\, deduction = \$136.4 + \$124.7$

STEP 15

Calculate the total FICA tax deduction.
$Total\, FICA\, tax\, deduction = \$136.4 + \$124.7 = \$261.$ The wage amount subject to Social Security tax is \$2,200, the Social Security tax deduction is \$136.4, the Medicare tax deduction is \$124.7, and the total deduction for FICA taxes is \$261..

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