Question

Calculate Social Security taxes, Medicare taxes and FIT for Jordon Barrett. He earns a monthly salary of $12,900. He is single and claims 1 deduction. Before this payroll, Barrett’s cumulative earnings were $111,400. (Social Security maximum is 6.2% on $118,500 and Medicare is 1.45%). Calculate FIT by the percentage method. (Use Table 9.1 and Table 9.2) (Round your answer to 2 decimal places.)

FIT $

Social Security taxes $

Medicare taxes $

Answer 1

FIT

In absence of table 9.1 and 9.2 in the question, the answer is based on 2017 table provided in IRS site. The answer is based on alternate 1. If some other table is provided in question, the answer will be different. However, the method will be same

Alternative 1 for Single Person and Monthly Payroll

Total Wage $12,900 less $337.50 (allowance) = $12562.50

Applying the table as apended below find the product of $12562.50 X 28% = $3517.50

Then deduct $638.55 (as per table) from the amount calculated above ($3517.50)

The FIT will be :$2878.95

The table for withholding tax (percentage method)

Social Security Tax

Social Secuirty tax is capped at maximum of $118500. Jordon's cumulative earning before this payroll was $111,400. Hence in this payroll, Social Security tax will be calculated on the differential of $118500 less $111400. So the social security tax will be on $7100 X 6.2% = $440.20

Medicare Tax

Medicare tax will be applied @ 1.45 % on total wage. Hence Medicare tax will be 1.45% X $12900 = $187.05