Chapter 11, Problem 3BPSB

To determine

Payroll Taxes:

The taxes liable on wages earned by employees during specified period of time are payroll taxes.

Gross Pay:

The total compensation earned by an employee before any deduction is called gross pay. It is the base amount for the computation of payroll taxes.

To determine:

Computation of the following for the week ended August 25

1. Each employee’s FICA withholding for Social Security.
2. Each employee’s FICA withholdings for Medicare
3. Employer’s FICA taxes for Social Security.
4. Employer’s FICA taxes for Medicare.
5. Employer’s FUTA taxes
6. Employer’s SUTA taxes
7. Each employee’s net pay.
8. Employer’s total payroll-related expense for each employee.

Answer to Problem 3BPSB

Solution:

1. Employee’s FICA withholdings for social security.

	Ahmed	Carlos	June	Marie	Total
Social Security Tax	$99.20	$93.93	$29.45	$62.00	$284.58

2. Employee’s FICA withholdings for Medicare

	Ahmed	Carlos	June	Marie	Total
Medicare tax	$36.25	$21.97	$6.89	$14.50	$79.61

3. Employer’s FICA taxes for Social Security

	Ahmed	Carlos	June	Marie	Total
Employer’s FICA for Social Security	$99.20	$93.93	$29.45	$62.00	$284.58

4. Employer’s FICA taxes for Medicare

	Ahmed	Carlos	June	Marie	Total
Employer’s FICA taxes for Medicare	$36.25	$21.97	$6.89	$14.50	$79.61

5. Employer’s FUTA taxes

	Ahmed	Carlos	June	Marie	Total
Employer’s FUTA Tax	$0	$0	$2.10	$0	$2.10

6. Employer’s SUTA taxes

	Ahmed	Carlos	June	Marie	Total
Employer’s SUTA Tax	$0	$0	$6.13	$0	$6.13

7. Net Pay of each Employee

	Ahmed	Carlos	June	Marie	Total
Net (take-home) Pay	$2,141.55	$1192.10	$381.66	$830.50	$4,545.81

8. Employer’s total payroll expense for each employee

	Ahmed	Carlos	June	Marie	Total
Total Payroll expense	$2,785.45	$1,731.65	$568.32	$1,151.50	$6,236.92

Explanation of Solution

Explanation:

1.

	Ahmed	Carlos	June	Marie	Total
Maximum Base	$117,000	$117,000	$117,000	$117,000
Earned through Aug. 2018	$115,400	$115,485	$6,650	$22,200
Amount subject to tax	$1,600	$1,515	$110,350	$94,800
Earned during current month	$2,500	$1,515	$475	$1,000
Subject to tax	$1,600	$1,515	$475	$1,000
Tax rate	6.20%	6.20%	6.20%	6.20%
Social Security Tax	$99.20	$93.93	$29.45	$62.00	$284.58

2.

	Ahmed	Carlos	June	Marie	Total
Earned during current month	$2,500	$1,515	$475	$1,000
Tax rate	1.45%	1.45%	1.45%	1.45%
Medicare tax	$36.25	$21.97	$6.89	$14.50	$79.61

3. Same as Employee’s FICA taxes for social security

	Ahmed	Carlos	June	Marie	Total
Employer’s FICA for Social Security	$99.20	$93.93	$29.45	$62.00	$284.58

4. Same as Employee’s FICA taxes for Medicare

	Ahmed	Carlos	June	Marie	Total
Employer’s FICA taxes for Medicare	$36.25	$21.97	$6.89	$14.50	$79.61

5.

	Ahmed	Carlos	June	Marie	Total
Maximum Base	$7,000	$7,000	$7,000	$7,000
Earned through Aug. 2018	$115,400	$115,485	$6,650	$22,200
Amount Subject to tax	0	0	$350	0
Earned during current month	$2,500	$1,515	$475	$1,000
Subject to tax	0	0	$350	0
Tax Rate	0.6%	0.6%	0.6%	0.6%
Employer’s FUTA Tax	$0	$0	$2.10	$0	$2.10

6.

	Ahmed	Carlos	June	Marie	Total
Subject to tax (same as FUTA )	0	0	$350	$0
Tax Rate	1.75%	1.75%	1.75%	1.75%
Employer’s SUTA Tax	$0	$0	$6.13	$0	$6.13

7.

	Ahmed	Carlos	June	Marie	Total
Gross Pay	$2,500	$1,515	$475	$1,000	$5,490
Less:
FICA Social Security tax	$(99.20)	$(93.93)	$(29.45)	$(62.00)	$(284.58)
FICA Medicare tax	$(36.25)	$(21.97)	$(6.89)	$(14.50)	$(79.61)
Income Tax Withholding	$(198)	$(182)	$(32)	$(68)	$(480)
Health Insurance	$(25)	$(25)	$(25)	$(25)	$(100)
Net (take-home) Pay	$2,141.55	$1192.10	$381.66	$830.50	$4,545.81

8.

	Ahmed	Carlos	June	Marie	Total
Gross Pay	$2,500	$1,515	$475	$1,000	$5,490
Add:
FICA Social Security tax	$99.20	$93.93	$29.45	$62.00	$284.58
FICA Medicare tax	$36.25	$21.97	$6.89	$14.50	$79.61
FUTA	$0	$0	$2.10	$0	$2.10
SUTA	$0	$0	$6.13	$0	$6.13
Health Insurance	$25	$25	$25	$25	$100
Pension fund contribution (5%)	$125	$75.75	$23.75	$50	$274.50
Total Payroll expense	$2,785.45	$1,731.65	$568.32	$1,151.50	$6,236.92

Conclusion

Conclusion:

The total payroll expenses of employer for each employee are $2,785.45 for Ahmed, $1,731.65 for Carlos, $568.32 for June and $1,151.50 for Marie.