Question

Thadeus Corp has gross payroll of $330,000 for the month ended June 2019. Of the $330,000, $50,000 exceeds the Social Security limit of $140,000, and $250,000 exceeds the FUTA and SUTA limits of $7,000. Thadeus withholds $65,000 in federal income tax and $19,000 in state income tax. Using the following tax rates: Social security 6.2%, Medicare 1.45%, FUTA 0.8%, and SUTA 1.6%; what is Thadeus' PAYROLL TAX EXPENSE for the month ended June 2019?

Select one:

$108,065

$22,313

$22,205

$15,385

$24,065

Answer 1

Payroll tax expenses are the taxes which employer is liable to pay of his own pocket for the benefit of the employees, here the federal income tax and $19,000 in state income tax will not be covered in payroll tax expenses.

Thadeus Corp has gross payroll of $330,000 for the month ended June 2019. Of the $330,000, $50,000 exceeds the Social Security limit of $140,000. So social security taxes will be only on $280,000 @ 6.2%

The Medicare taxes has no such limit as Social security taxes for employers, it has to be contributed on the entire gross pay of $330000.

Further the FUTA and SUTA Taxes are only paid by employers for each employee upto $ 7000 pay only , which is applicable only for $80000 (330000 - 250000 ) of pay which are covered in this.

Thus Payroll Taxes = Social Security taxes + Medicare taxes + FUTA + SUTA

Social Security tax = $ 280,000 * 6.2% = $ 17,360

Medicare tax = $ 330000 * 1.45 % = $ 4785

FUTA Taxes = $ 80,000 * 0.8% = $ 640

SUTA Taxes = $ 80,000 * 1.6 % = $ 1280

Thadeus' PAYROLL TAX EXPENSE for the month ended June 2019 = $ 17360 + 4785 +640 +1280 = $ 24,065.

Thadeus' PAYROLL TAX EXPENSE for the month ended June 2019= $ 24,065.

Thus the correct option is ----------E i.e $24,065