What is the total annual FICA tax for an annual salary of $110,330 with $106,800 as the maximum taxable earnings?

• A. $8,221.39
• B. $7,500.50
• C. $8,500.00
• D. $9,000.00

Answer: (A)

To calculate the total annual FICA tax, it is essential to understand that FICA consists of two components: Social Security tax and Medicare tax.

For 2023, the Social Security tax rate is 6.2% applied to earnings up to a wage base limit of $160,200. However, in this scenario, the maximum taxable earnings are stated as $106,800. Therefore, only this amount is subject to the Social Security tax. The Medicare tax applies to all earnings without any limit, at a rate of 1.45%.

First, the Social Security tax is calculated on the maximum taxable amount of $106,800:

• Social Security Tax = $106,800 * 6.2% = $6,617.60.

Next, we calculate the Medicare tax based on the entire salary of $110,330:

• Medicare Tax = $110,330 * 1.45% = $1,599.79.

To find the total annual FICA tax, add the two amounts calculated:

• Total FICA Tax = Social Security Tax + Medicare Tax = $6,617.60 + $1,599.79 = $8,217.39.

When rounded, this total comes close