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:
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.
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