Question

In 2020, the maximum taxable income for Social Security was $137,700 and the tax rate was 6.2%.
a. What is the maximum Social Security tax anyone could have paid in the year 2020?

b. Randy had two jobs in 2020. One employer paid him $77,010 and the other paid him $71,200. Each employer took out 6.2% for Social Security taxes. How much did Randy overpay for Social Security taxes in 2020?

Answer 1

Part a)

6.2% = 0.062

6.2% of 137,700 = 0.062*137700 = 8,537.40

Answer: $8,537.40

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Part b)

Tax from 1st job = 6.2% of 77,010 = 0.062*77010 = 4,774.62

Tax from 2nd job = 6.2% of 71,200 = 0.062*71,200 = 4,414.40

Total tax = 4,774.62 + 4,414.40 = 9,189.02

Amount overpaid = 9,189.02 - 8,537.40 = 651.62

Notice I subtracted off the result from part a)

Answer: $651.62