The employees of Boggus Ford earn wages of $15,600 for two weeks ending April 12. FIT taxes are $424 were withheld. The entire amount of wages is subject to the FICA taxes, BUT only $10,800 is taxable under the federal and state unemployment compensation laws. The state contribution rate of the employer is 3.9%. All employees are subject to state unemployment contribution rate of 0.5% on the April taxabe wages of $10,800, and the employees' contributions are to deducted by the employer. JOURNALIZE the payment of the wages, and record the payroll taxes, assuming the contributions of the employer and the employees are recorded in one account, SUTA taxes Payable. USE a table to correctly format the journal entries OR use Word to indent CR entries.
The employees of Boggus Ford earn wages of $15,600 for two weeks ending April 12. FIT taxes are $424 were withheld. The entire amount of wages is subject to the FICA taxes, BUT only $10,800 is taxable under the federal and state
The state contribution rate of the employer is 3.9%. All employees are subject to state unemployment contribution rate of 0.5% on the April taxabe wages of $10,800, and the employees' contributions are to deducted by the employer.
JOURNALIZE the payment of the wages, and record the payroll taxes, assuming the contributions of the employer and the employees are recorded in one account, SUTA taxes Payable. USE a table to correctly format the
Federal Insurance Contributions Act (FICA) tax:
Federal government imposes taxes on the employees' pay to provide benefits to retired, old age, orphans, and disabled. This tax is also referred to as Social Security tax because the program is devised to benefit the society. FICA tax includes two components, OASDI (Old age, survivors, and disability insurance), and HI (health insurance). 6.2 % is levied as OASDI component, and 1.45% as HI component. So, the total of FICA tax rate is 7.65% (6.2% + 1.45% for all the employees on the first $200,000 of earnings, and another 0.9% on the earnings above $200,000.
Federal unemployment compensation tax (FUTA):
This is the compensation provided to the unemployed people by the federal government from the taxes collected from the employers, as a percentage of 6.0% on the employees' earnings. Federal government refunds the employers with 5.4% on FUTA, if the employers have paid SUTA. So, FUTA would be reduced to 0.6% for those employers.
State unemployment compensation tax (SUTA):
This is the compensation provided to the unemployed people by the state government from the taxes collected from the employers, as a percentage based on the state contribution rate on employees' payrolls.
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