1. Social Security, Medicare, and Other Taxes
Section 6.3
Social Security, Medicare, and Other Taxes

2. FICA and Medicare
FICA: Federal Insurance Contributions Act, passed into law in the 1930s. Now known as Social Security.
Soc. Sec. = 6.2% x earnings up to $115,000
Medicare = 1.45% x total earnings

3. Find (a) the Social Security tax and (b) the Medicare tax that must be withheld from gross earnings of $418.50
Mary Single has earned $108, so far this year. If her gross earnings are $3080 this week, find the Social Security tax to be withheld.

4. Tax & the Self-Employed Person
Since there is no ‘employer’ contribution, the self-employed person pays double!
Use adjusted earnings
FICA Tax = 12.4% x Adjusted Earnings
Medicare Tax = 2.9% x Adjusted Earnings.
EX: Find (a) the Social Security tax and (b) the Medicare tax for a self-employed auto mechanic who had adjusted earnings of $73,875 this year.

5. State Disability Insurance Deductions (SDI)
Qualifying employees must pay a portion of their earnings into SDI program. A typical program requires 1% of gross earnings on the first $31,800 earned each year.

6. An employee has gross earnings of $525. 80 this week
An employee has gross earnings of $ this week. The employee has not earned $31,800 this year and the SDI rate is 1%. What is the state disability insurance deduction?
Linda has earned $30,780 so far this year. Her earnings this pay period are $ Find the SDI deduction using an SDI rate of 1% on the first $31,800.