Question

Apple employed Bobby in Year 1. Bobby earned $5,100 per month and worked the entire year. Assume the Social Security tax rate is 6 percent for the first $110,000 of earnings, and the Medicare tax rate is 1.5 percent. Tom’s federal income tax withholding amount is $900 per month. Use 5.4 percent for the state unemployment tax rate and 0.6 percent for the federal unemployment tax rate on the first $7,000 of earnings per employee.

Required
a. Answer the following questions.
1. What is Bobby's net pay per month?
2. What amount does Bobby pay monthly in FICA payroll taxes?
3. What is the total payroll tax expense for Apple for January Year 1? February Year 1? March Year 1? December Year 1?
b. Assume that instead of $5,100 per month Bobby earned $9,600 per month. Answer the following questions.
1. What is Bobby net pay per month?
2. What amount does Bobby pay monthly in FICA payroll taxes?
3. What is the total payroll tax expense for Apple for January Year 1? February Year 1? March Year 1? December Year 1?

Answer 1

a.1.Net pay per month of Bobby:

Basic Pay(5100*12) =61200

Less:Social Security Tax(6%of 61200) =(3672)

Less:Medicare tax(1.5%of 61200) =(918)

Less: State unemployment tax rate(5.4%of 61200) =(3304.8)

Less:Federal unemployment tax rate(0.6% of 7000) = (42)

  NET PAY PER MONTH OF BOBBY =53263.2

2. FICA MONTHLY PAYROLL TAXES

  Social Security Tax=5100*6% = 306

Medicare Tax =5100*1.5% =76.5

​​​FICA MONTHLY PAYROLL TAX =382.5

3. Payroll tax for Apple:

  January 1

Social Security Tax(6%of 5100) =306

Medicare Tax(1.5% of 5100) =76.5

SUTA TAXES(5.4% of 5100) =275.4

FUTA TAXES(0.6% Of 5100) =30.6

Total payroll taxes =688.5

  February 1

Social Security Tax(6%of 5100) =306

Medicare Tax(1.5% of 5100) =76.5

SUTA TAXES(5.4% of 5100) =275.4

FUTA TAXES(0.6% Of 1900) =11.4

Total payroll taxes =669.3

Note:As FUTA taxes are applicable on first $7000 earnings so therefore only 1900(7000-5100) will be taken into consideration as 5100 has already been taken in January.

March 1

Social Security Tax(6%of 5100) =306

Medicare Tax(1.5% of 5100) =76.5

SUTA TAXES(5.4% of 5100) =275.4

Total payroll taxes =657.9

December 1 Social Security Tax(6%of 5100) =306

Medicare Tax(1.5% of 5100) =76.5

SUTA TAXES(5.4% of 5100) =275.4

Total payroll taxes =657.9

b.1.Net pay per month of Bobby:

Basic Pay(9600*12) =115200

Less:Social Security Tax(6%of 110000) = (6600)

Less:Medicare tax(1.5%of 115200) =(1728)

Less: State unemployment tax rate(5.4%of 115200) =(6220.8)

Less:Federal unemployment tax rate(0.6% of 7000) = (42)

  NET PAY PER MONTH OF BOBBY =100609.2

Note:Social Security tax is limited upto $110000 and FUTA Taxes are limited upto $7000.After passing that amount tax is not applicable on extra amountbor earning.

2. FICA MONTHLY PAYROLL TAXES

Social Security Tax=9600*6% = 576

Medicare Tax =9600*1.5% = 144

​​​FICA MONTHLY PAYROLL TAX =  720

3. Payroll tax for Apple:

  January 1

Social Security Tax(6%of 9600) =576

Medicare Tax(1.5% of 9600) =144

SUTA TAXES(5.4% of 9600) =275.4

FUTA TAXES(0.6% Of 7000) =42

Total payroll taxes =1037.4

Note:FUTA Taxes is limit is upto $7000.

  February 1

Social Security Tax(6%of 9600) =576

Medicare Tax(1.5% of 9600) =144

SUTA TAXES(5.4% of 9600) =275.4

Total payroll taxes =995.4

March 1

Social Security Tax(6%of 9600) =576

Medicare Tax(1.5% of 9600) =144

SUTA TAXES(5.4% of 9600) =275.4

Total payroll taxes = 995.4

December 1 Social Security Tax(6%of 4400) =264

Medicare Tax(1.5% of 9600) =144 SUTA TAXES(5.4% of 9600) =275.4

Total payroll taxes =683.4

Note:Upto November Bobby have received pay 105600 and Bobby Social Security tax will be applicable upto 110000.So now he just have to pay tax on 4400 (110000-105600). Therefore his social Security tax will be applicable on 4400(9600-5200) for December 1

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