Question

The problem refer to self-employed individuals. These people pay a Social Security tax of 12.4% and Medicare tax of 2.9%. Find both of the taxes on the following annual adjusted earnings.

Ron Morris, a Chic-Filet franchise owner, earned $78,007.14.

Solution

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Answered 1 year ago
Answered 1 year ago
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First, lets see the formula to calculate the social security tax and Medicare tax:

Social security tax=Gross earnings×Rate of FICAMedicare tax=Gross earnings×Rate of Medicare\begin{align*} \text{Social security tax} &= \text{Gross earnings} \times \text{Rate of FICA}\\[7pt] \text{Medicare tax} &= \text{Gross earnings} \times \text{Rate of Medicare} \end{align*}

Gross earnings = $78,007.14

Rate of FICA = 0.124

Rate of medicare = 0.029

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