Catherine and Russel Perret live in Santa Barbara and are both employees for loc

Question

Catherine and Russel Perret live in Santa Barbara and are both employees for local firms. Catherine has a job that she earns $ 200,000 (all of both Catherine’s and Russel’s earnings are fully subject to social security, medicare, state and federal income tax) at, and another job at which she earns $ 250,000. Russel has one job, and earns $ 300,000 at it. Catherine also has a substantial corporate bond portfolio and earns (receives) $ 56,000 at it annually (and 2014 was a normal year as to the couple’s wages and other earnings), but she pays $ 2,000 annually to her investment advisor/broker for the advice/commissions. Both Catherine’s and Russel’s employers withheld the proper amounts for social security taxes on wages, and all medicare taxes on all wages, but the only other withholding that their employer’s withheld for was state and basic federal income taxes (Ms. Perret’s employer’s do not even know about her bondholdings). There was no withholding of any kind from Ms. Perret’s interest income.

How much of a social security amount due or refund are the Perret’s needing to pay/receive?

How much total medicare (all amounts due/refundable) are the Perret’s needing to pay/receive?

Explanation / Answer

Social security tax to be paid = 6.2% of $117000 = $7254

$117000 is the maximum taxable amount in 2014.

Medicare to be paid = 1.45% of total wages of both of them

                                 = 1.45% of (200000 + 250000 + 300000)

                                 = $10875

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