Question

Problem Information

Use the following tax rates, ceiling and maximum taxes:
Employee and Employer OASDI:	6.20%	$127,200	$7,886.40
Employee* and Employer HI:	1.45%	No limit	No maximum
Self-employed OASDI:	12.4%	$127,200	$15,772.80
Self-employed HI:	2.9%	No limit	No maximum

*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed.

Rounding Rules: Unless instructed otherwise compute hourly rate and overtime rates as follows:

Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the overtime rate).

If the third decimal place is 5 or more, round to the next higher cent.

If the third decimal place is less than 5, drop the third decimal place.

Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.

Jax Company's (a monthly depositor) tax liability (amount withheld from employees' wages for federal income tax and FICA tax plus the company's portion of the FICA tax) for July was $1,210. No deposit was made by the company until August 24, 20--. Determine the following:

Note: Round your answers to the nearest cent and assume 365 days in a year.

a. The date by which the deposit should have been made	August 25
b. The penalty for failure to make timely deposit	$________
c. The penalty for failure to fully pay tax when due	$________
d. The interest on taxes due and unpaid (assume a 4% interest rate)	$________

Answer 1

A. 15 th August. If you reported taxes of $50,000 or less during the lookback period, you're a monthly schedule depositor, and you generally must deposit your employment taxes on payments made during a given month on or before the 15th day of the following month.

you must deposit taxes on payments made in July by August 15. If the 15th of any calendar month falls on a Saturday, Sunday, or legal holiday , the deposit is due by the next business day. A business day is any day other than a Saturday, Sunday, or legal holiday.

B.The Failure to deposit penalty structure has four tiers, with the penalty amount increasing over time.

2% of the unpaid deposit for payments that are 1 to 5 days late

5% for tax payments that are 6-15 days late

10% for deposits that are more than 15 days late or made within ten days of receiving the first IRS notice requesting a tax payment

15% for deposits not received within ten days after receiving the first IRS notice demanding payment.

No deposit was made until August 24,means deposit is delayed by 9 days(August 15 to 24)

Penalty for failure to make timely deposit=1210×5%=60.5

C. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.

Penalty for failure to fully pay tax.=1210×0.5%=6.05

D. Interest on taxes due and unpaid (assume a 4% interest rate)=($1210× 0.04 × 9/365)=1.19