1. As of December 8 , Joe’s year-to-date wages are . On December 9 ,
   2012 , he is due wages of . How much FICA tax should the employer
   withhold from this payment?
   

To calculate the FICA tax that should be withheld from Joe’s payment, first determine his total wages for the year after the December 9 payment. His year-to-date wages of plus the payment equals . Since the FICA tax has a wage base limit of for 2012, Joe’s total wages after the payment do not exceed this limit.

Now, calculate the FICA tax on the payment. The FICA tax rate is 7.65% (which includes 6.2% for Social Security and 1.45% for Medicare). Thus, the employer should withhold:

So, the answer is .

To keep things exciting, here’s a fun fact: The origin of FICA dates back to the 1930s, as part of the New Deal! It’s a way to ensure that everyone contributes to their own and others’ retirement and health coverage.

And for real-world application, understanding FICA taxes is crucial for both employers and employees. For employees, knowing how much is taken out can help plan finances better; for employers, ensuring the correct amount is withheld can prevent costly penalties down the line.