Question

Wage and Tax Statement Data on Employer FICA Tax

Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees' earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

Employee	Date First Employed	Monthly Salary		Monthly Income Tax Withheld
Arnett	Jan. 2	$3,500		$490
Cruz	Oct. 1	5,500		990
Edwards	Apr. 16	2,600		325
Harvin	Nov. 1	2,200		275
Nicks	Jan. 16	5,650		1,271
Shiancoe	Dec. 1	3,800		589
Ward	Feb. 1	6,300		1,355

Required:

1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

Employee	Gross Earnings		Federal Income Tax Withheld		Social Security Tax Withheld		Medicare Tax Withheld
Arnett	$		$		$		$
Cruz
Edwards
Harvin
Nicks
Shiancoe
Ward
					$		$

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee’s earnings; (e) total.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

(a)	$
(b)
(c)
(d)
(e)	$

Answer 1

Req 1.
Employee		Gross	Annual Tax withheld	Social Security	Medicare tax
		Earnings			tax withheld	withheld
Arnett		42000	5880		2520		630
Cruz		66000	11880		3960		990
Edwards		31200	3900		1872		468
Harvin		26400	3300		1584		396
Nicks		67800	15252		4068		1017
Shiancoe		45600	7068		2736		684
Ward		75600	16260		4536		1134
TOTAL		354600	63540		21276		5319
Req 2.
Req. a.
Social security tax: 21276
Req. b.
Medicare tax: $ 5319
Req c.
State unemployment tax (10000*7*5.40%):	3780
Req d.
Federal Unemployment tax (10000*7*0.60%):	420