Chapter 15, Problem 1PA

Summary Introduction

To determine:

federal insurance contribution act(FICA) contribution amount made by the employer of J.

Introduction:

FICA stands for federal insurance contribution act tax it is a U.S employment tax that imposed by U.S government on both employer and employee. The tax amount used for the welfare of disabled people, senior citizens and other needed section of society.

Explanation of Solution

If a person is an employee and not self employed, then the employee and the employer make a contribution of 7.65% of gross salary up to a limit of $106,800 to FICA.

Given,

J earned $ 51,250 this year.

Formula to calculate FICA contribution,

$\text{FICA contribution}=\text{Gross salary}\times 7.65\%$

Substitute $51,250 for gross salary in the above formula.

$\begin{array}{c}\text{FICA contribution}=\$51,250\times 7.65\%\\ =\$3,920.63\end{array}$

Conclusion

Hence, the FICA contribution by employer is $3,920.63.