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	$3,200		$448
Cruz	Oct. 1	5,300		954
Edwards	Apr. 16	2,600		325
Harvin	Nov. 1	2,400		300
Nicks	Jan. 16	5,650		1,271
Shiancoe	Dec. 1	3,400		527
Ward	Feb. 1	6,600		1,419

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

Q1. According to the Question, we first need to calculate the amounts to be reported on each employee's Wage and Tax Statement for 20Y8:

Employee	Duration(a)	Monthly Salary($)(b)	Gross Earnings(a*b)	Federal Income Tax Withheld	Social Security Tax Withheld 6%	Medicare Tax Withheld 1.5%
Arnett	12 months	3,200	38,400	5,376	2,304	576
Cruz	3 months	5,300	15,900	2,862	954	239
Edwards	8.5 months	2,600	22,100	2,763	1,326	332
Harvin	2 months	2,400	4,800	600	288	72
Nicks	11.5 months	5,650	64,975	14,617	3899	975
Shiancoe	1 month	3,400	3,400	527	204	51
Ward	11 months	6,600	72,600	15,609	4,356	1,089
Total-			222,175	42,354	13,331	3,334

Working Notes:

1. Amount for Social security tax withheld is calculated as=6% of gross earnings.

2. Amount for Medicare tax Withheld is calculated as= 1.5% of Gross earnings

Q2. Next, we need to calculate the following employer payroll taxes for the year:

(a) Social security Tax= $13,331

(b)Medicare Tax= $3,334

(c)Calculation of state Unemployment compensation which is 5.4% on first $10,000 and federal unemployment compensation which is 0.6% on the first $10,000:

Employee	Gross Earnings	If amount is restricted to $10,000(a)	State Unemployment compensation 5.4%of (a)	Federal unemployment compensation 0.6% of (a)
Arnett	38,400	10,000	540	60
Cruz	15,900	10,000	540	60
Edwards	22,100	10,000	540	60
Harvin	4,800	4,800	259	29
Nicks	64,975	10,000	540	60
Shiancoe	3,400	3,400	184	20
Ward	72,600	10,000	540	60
Total-	222,175		3,143	349

Final Answer:-

(a)$13,331

(b)$3,334

(c)$3,143

(d)349