Question

Find the FICA and Medicare tax for each of the following self-employed people. Assume that none of them has earned over $127,200 for the year. Use a FICA rate of 12.4% and a Medicare rate of 2.9%. 12. Lois Steem is a self-employed assertiveness training coach. Her adjusted income is $19,500 for the first quarter.

(a) FICA tax ________________________ (b) Medicare tax ________________________

Answer 1

The FICA (for Federal Insurance Contributions Act) tax (also known as Payroll Tax or Self-Employment Tax, depending on your employment status) is your contribution to Social Security and Medicare as a percentage of your salary.

Since Lois is self employed:

Since FICA rate is 12.4% then Lois will Pay: 12.4%/2=6.2%

Since Medicare rate is 2.9% then Lois will pay 2.9%/2=1.45%

If any person is  self-employed, he don't have to pay FICA on all his salary, just on 92.35% of it (92.35 being 100 minus 7.65 - which is the contribution that your employer would have paid, if he had an employer, which he don't).

92.35% of 19,500 is 18,008.25

Answer:

a) FICA Tax:

18,008.25* 6.2%=1,117 (round off)

b) Medicare Tax:

18,008.25*1.45%=261 (round off)