Problem 6-17 The Nanny Tax (LO 6.7) Sally hires a maid to work in her home for $400 per month. The maid is 25 years old and not related to Sally. During 2021, the maid worked 10 months for Sally. Do not round immediate computations and round your final answers to two decimal places. a. What is the employer's share of Social Security tax Sally must pay? b. What is the employer's share of Medicare tax Sally must pay? Sally's employer's Medicare tax: $ c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages? Sally should withhold for Social Security and Medicare tax of: $
Problem 6-17 The Nanny Tax (LO 6.7) Sally hires a maid to work in her home for $400 per month. The maid is 25 years old and not related to Sally. During 2021, the maid worked 10 months for Sally. Do not round immediate computations and round your final answers to two decimal places. a. What is the employer's share of Social Security tax Sally must pay? b. What is the employer's share of Medicare tax Sally must pay? Sally's employer's Medicare tax: $ c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages? Sally should withhold for Social Security and Medicare tax of: $
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Problem 6-17
The Nanny Tax (LO 6.7)
Sally hires a maid to work in her home for $400 per month. The maid is 25 years old and not related to Sally. During 2021, the maid worked 10 months
for Sally.
Do not round immediate computations and round your final answers to two decimal places.
a. What is the employer's share of Social Security tax Sally must pay?
b. What is the employer's share of Medicare tax Sally must pay?
Sally's employer's Medicare tax: $
c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages?
Sally should withhold for Social Security and Medicare tax of: $
Expert Solution
Step 1
The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.
a. Social Security Tax
Wage per month = $400
social security tax = ( wage per month x number of months worked) x tax rate
social security tax = ( 400 x 10 ) x 6.20%
social security tax =$248
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