1. We know from our problem that Christina’s annual salary averaged $22,040. We also know that her annual Social Security benefit will be 42% of her annual averaged salary, so to find the amount of her annual Social Security benefit, we need to find the 42% of $22,040.
Annual Social Security benefit = 42%($22,040) = $9,256.80
Now, to find how much Social Security benefit she will receive per month, we need divide her annual Social Security benefit by the number of months in a year (12):
Monthly Social Security benefit = \(\frac{9,256.80}{12}\) = $771.40
Now, her monthly bills total about $1,375, so she will need $1,375 - $771.40 = $603.60 from her savings each month to cover her monthly bills.
We can conclude that the correct answer is B. At least $603.60
2. Social Security tax is calculated by multiplying the taxable wages of the employee by 6.2%, but there is always a wage base limit for Social Security tax. In our problem the base limit is $106,800 (maximum taxable earnings), so to calculate the Social Security that would be applied to an annual salary of $235,430, we just need to calculate the 6.2% of $106,800
Social Security tax = 6.2%($106,800) = $6,621.60
Medicare tax is calculated by multiplying the wages of the employee by 1.45%. There is no wage base limit for Medicare, so to calculate Medicare tax, we are going to find the 1.45% of the total wage, $235,430
Medicare tax = 1.45%($235,430) = $3,413.70
We can conclude that the correct answer is D. Social Security tax: $6,621.60, Medicare tax: $3,413.70
3. The FICA tax is composed of two taxes: Social Security tax and Medicare tax.
Social Security tax is calculated by multiplying the taxable wages of the employee by 6.2%, but there is always a wage base limit for Social Security tax. In our problem the base limit is $106,800 (maximum taxable earnings), so to calculate the Social Security that would be applied to an annual salary of $165,000, we just need to calculate the 6.2% of $106,800
Social Security tax = 6.2%($106,800) = $6,621.60
Medicare tax is calculated by multiplying the wages of the employee by 1.45%. There is no wage base limit for Medicare, so to calculate Medicare tax, we are going to find the 1.45% of the total wage, $165,000
Medicare tax = 1.45%($165,000) = $2,392.50
FICA tax = Social Security tax + Medicare tax
FICA tax = $6,621.60 + $2,392.50 = $9,014.10
We can conclude that the correct answer is B. $9,014.10
