Fundamental Payroll Certification (FPC) Practice Exam

The employee payroll tax contribution for wages above $200,000 is indeed 2.35%. This additional Medicare tax is applicable to high-income earners, specifically on wages that exceed the $200,000 threshold for a calendar year. The standard Medicare tax rate is 1.45% on all wages; however, once an employee's wages surpass the $200,000 limit, they are subject to an additional 0.9% tax. Therefore, the total rate for employees earning over $200,000 becomes 2.35%, which is comprised of the standard 1.45% Medicare tax plus the additional 0.9%.

This additional Medicare tax is implemented to ensure that higher-income earners contribute a larger share toward the Medicare system, reflecting the progressive nature of the U.S. tax system. Understanding these thresholds and rates is crucial for accurate payroll calculations and compliance with federal tax regulations.