Chapter 11, Problem 3BPSB

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 1:

To Calculate:

The FICA Social Security Taxes Payable withholding of each employee

Answer to Problem 3BPSB

Employee	FICA Social Security Tax
Ahmed	99.20
Carlos	93.93
Jun	29.45
Marie	62.00
Total	284.58

Explanation of Solution

FICA social security tax is payable @6.2% on income up to $128,400

Employee	Gross Pay through Aug	Gross Pay in current week	Gross Pay on which FICA social security tax needs to be paid	FICA social security tax needs to be paid
Ahmed	126,800	2500	$128400-126800=1600$	$1600*6.2\%=99.20$
Carlos	126,885	1515	$128400-126855=1515$	$1515*6.2\%=93.93$
Jun	6,650	475	475	$475*6.2\%=29.45$
Marie	23,700	1000	1000	$1000*6.2\%=62$

Thus, the FICA Social Security Taxes have been computed for each employee.

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 2:

To Calculate:

The FICA Medicare Taxes Payable withholding of each employee

Answer to Problem 3BPSB

Employee	Employee FICA Medicare Tax
Ahmed	36.25
Carlos	21.97
Jun	6.89
Marie	14.20
Total	79.61

Explanation of Solution

Employee FICA Medicare Taxes are computed @1.45% of gross pay

Employee	Gross Pay in current week	FICA Medicare Tax
Ahmed	2500	$2500*1.45\%=36.25$
Carlos	1515	$1515*1.45\%=21.97$
Jun	475	$475*1.45\%=6.89$
Marie	1000	$1000*1.45\%=14.50$

Thus, the Employee FICA Medicare Tax for each employee has been computed .

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 3:

To Calculate:

The FICA Social Security Taxes Payable by the Employer

Answer to Problem 3BPSB

Employee	Employer FICA Social Security Tax
Ahmed	99.20
Carlos	93.93
Jun	29.45
Marie	62.00
Total	284.58

Explanation of Solution

FICA social security tax is payable @6.2% on income up to $128,400

Employee	Gross Pay through Sep	Gross Pay in current week	Gross Pay on which FICA social security tax needs to be paid	Employer FICA social security tax needs to be paid
Ahmed	126,800	2500	$128400-126800=1600$	$1600*6.2\%=99.20$
Carlos	126,885	1515	$128400-126855=1515$	$1515*6.2\%=93.93$
Jun	6,650	475	475	$475*6.2\%=29.45$
Marie	23,700	1000	1000	$1000*6.2\%=62$

Thus, the Employer FICA Social Security Taxes have been computed.

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 4:

To Calculate:

The FICA Medicare Taxes Payable by the Employer

Answer to Problem 3BPSB

Employee	Employer FICA Medicare Tax
Ahmed	36.25
Carlos	21.97
Jun	6.89
Marie	14.20
Total	79.61

Explanation of Solution

Employer FICA Medicare Taxes are computed @1.45% of gross pay

Employee	Gross Pay in current week	FICA Medicare Tax
Ahmed	2500	$2500*1.45\%=36.25$
Carlos	1515	$1515*1.45\%=21.97$
Jun	475	$475*1.45\%=6.89$
Marie	1000	$1000*1.45\%=14.50$

Thus, the Employer FICA Medicare Tax has been computed .

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 5:

To Calculate:

The Employer FUTA Taxes Payable by the Employer

Answer to Problem 3BPSB

Employee	Employer FUTA Tax
Ahmed	0
Carlos	0
Jun	2.10
Marie	0
Total	2.10

Explanation of Solution

Employer FUTA Taxes are computed @0.6% of first $7,000

Employee	Gross Pay through Aug	Gross Pay in current week	Gross Pay on which employer FUTA tax needs to be paid	Employer FUTA Tax
Ahmed	126,800	2500	0 as Gross Income >7,000	0
Carlos	126,885	1515	0 as Income >7,000	0
Jun	6,650	475	$7000-6650=350$	$350*0.6\%=2.10$
Marie	23,700	1000	0 as Income >7,000	0

Thus, the Employer FUTA Tax has been computed .

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 6:

To Calculate:

The Employer SUTA Taxes Payable by the Employer

Answer to Problem 3BPSB

Employee	Employer SUTA Tax
Ahmed	0
Carlos	0
Jun	18.90
Marie	0
Total	18.90

Explanation of Solution

Employer SUTA Taxes are computed @5.4% of first $7,000

Employee	Gross Pay through Sep	Gross Pay in current week	Gross Pay on which employer SUTA tax needs to be paid	Employer SUTA Tax
Ahmed	126,800	2500	0 as Gross Income >7,000	0
Carlos	126,885	1515	0 as Income >7,000	0
Jun	6,650	475	$7000-6650=350$	$350*5.4\%=18.90$
Marie	23,700	1000	0 as Income >7,000	0

Thus, the Employer SUTA Tax has been computed .

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 7:

To Calculate:

The net take home pay of each employee

Answer to Problem 3BPSB

Employee	Net Pay $
Ahmed	2146.55
Carlos	1197.10
Jun	386.66
Marie	835.50
Total	4,565.82

Explanation of Solution

Employee	Gross Pay in current week (a)	FICA Social Security Tax (b)	Employee FICA Medicare Tax (c)	Income Tax Withheld (d)	Insurance Expenses (e)	Employee Take home expenses (a-b-c-d-e)
Ahmed	2500	99.20	36.25	198	20	2146.55
Carlos	1515	93.93	21.97	182	20	1197.10
Jun	475	29.45	6.89	32	20	386.66
Marie	1000	62.00	14.20	68	20	835.50
	5490	284.58	79.61	480	80	4,565.82

Thus, the net pay for each employee has been computed.

To determine

Concept Introduction:

Employee FICA Taxes:

Employee FICA taxes are withheld from salaries by employers to cover Social Security Taxes which is used to cover post retirement or disability expenses and Medicare taxes used to cover medical expenses.

Employer Payroll Taxes An employer needs to pay Employer FICA tax which is 6.2% Social Security tax and 1.45% Medicare tax in addition to employee salary. Also, they need to pay State and Federal Unemployment Taxes.

Requirement 8:

To Calculate:

The employer's payroll related expense

Answer to Problem 3BPSB

Employee	Total Payroll Expenses $
Ahmed	2800.45
Carlos	1746.65
Jun	596.09
Marie	1166.50
Total	6,309.69

Explanation of Solution

Employer Payroll expenses include the Gross Salaries and all the State and Federal Taxes and other benefits payable to the employees by the employer.

Employee	Gross Pay in current week (a)	Employer FICA Social Security Tax (b)	Employer FICA Medicare Tax (c)	Employer FUTA Taxes (d)	Employer SUTA Taxes(e)	Insurance Expenses (f)	Contribution to pension @8% of gross Pay (g)	Payroll expenses (a +b+c+d+e+f+g)
Ahmed	2500	99.20	36.25	0	0	40	125	2800.45
Carlos	1515	93.93	21.97	0	0	40	75.75	1746.65
Jun	475	29.45	6.89	2.10	18.90	40	23.75	596.09
Marie	1000	62.00	14.20	0	0	40	50	1166.50
	5490	284.58	79.61	2.10	18.90	160	274.50	6,309.69

Thus, the employer's total payroll expenses relating to each employee has been computed.