Question

Fishing Guides Co. has four employees. FICA Social Security taxes are 6.2% of the first $118,500 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company’s FUTA taxes are 0.6% and SUTA taxes are 1.75%. The company is preparing its payroll calculations for the week ended September 30. Payroll records show the following information for the company’s four employees.

	A	B	C	D
1	Name	Gross Pay through Sep. 23	Current Week
2			Gross Pay	Income Tax Withholding
3	Ahmed	$116,900	$2,500	$198
4	Carlos	116,985	1,515	182
5	Jun	6,650	475	32
6	Marie	23,700	1,000	68

Page 438

In addition to gross pay, the company must pay 60% of the $50 per employee weekly health insurance; each employee pays the remaining 40%. The company also contributes an extra 5% of each employee’s gross pay (at no cost to employees) to a pension fund.

Required

Compute the following for the week ended September 30 (round amounts to the nearest cent):

1. Each employee’s FICA withholdings for Social Security.
2. Each employee’s FICA withholdings for Medicare.
3. Employer’s FICA taxes for Social Security.

Check (3) $284.58

4. Employer’s FICA taxes for Medicare.

(4) $79.61

5. Employer’s FUTA taxes.

(5) $2.10

6. Employer’s SUTA taxes.
7. Each employee’s net (take-home) pay.

(7) Total net pay, $4,565.81

8. Employer’s total payroll-related expense for each employee.

Answer 1

Fishing Guides Co. has four employees and the details of the pay for the last week of september is given in the question,

FICA- Social security is tax withheld from employees and equal contribution is made by the employer to the limit of $ 118500 in this case, here for Employee Ahmad, the gross pay including this week pay will exceed the limit, so his social security tax will be limited to the income upto $ 118500 , thus income liable for social security tax = $ 1600 ( 118500 - 116900).

Social security tax for Ahmed = $ 1600 * 6.2% = $ 99.20 and for rest of the employees it will be on the weeks gross pay @ 6.2%.

For Medicare taxes there is no such limit so the entireb gross pay will be liable for medicare tax deduction.

Next for FUTA and SUTA taxes only the employer makes the contribution and not the employee and it is also limited upto $ 7000 for each employees so only Employee - Jun will be liable for FUTA and SUTA taxes and not others.

pension fund are only contributed by employer @ 5% on gross pay for the week and health insurance is contributed 60% by employer and 40% by employee :

BAsed on the above discussion the calculations using tables are made as follows:

1 Each employee’s FICA withholdings for Social Security.

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		6.20%
Ahmed	$       1,600.00	6.20%	$      99.20
Carlos	$       1,515.00	6.20%	$      93.93
Jun	$ 475.00	6.20%	$      29.45
Marie	$       1,000.00	6.20%	$      62.00
		Total	$    284.58

2.  Each employee’s FICA withholdings for Medicare.

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		1.45%
Ahmed	$       2,500.00	1.45%	$         36.25
Carlos	$       1,515.00	1.45%	$         21.97
Jun	$ 475.00	1.45%	$            6.89
Marie	$       1,000.00	1.45%	$         14.50
		Total	$         79.61

3  Employer’s FICA taxes for Social Security. = $ 284.58

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		6.20%
Ahmed	$       1,600.00	6.20%	$      99.20
Carlos	$       1,515.00	6.20%	$      93.93
Jun	$ 475.00	6.20%	$      29.45
Marie	$       1,000.00	6.20%	$      62.00
		Total	$    284.58

4.  Employer’s FICA taxes for Medicare. = $ 79.61

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		1.45%
Ahmed	$       2,500.00	1.45%	$         36.25
Carlos	$       1,515.00	1.45%	$         21.97
Jun	$ 475.00	1.45%	$            6.89
Marie	$       1,000.00	1.45%	$         14.50
		Total	$         79.61

5.  Employer’s FUTA taxes. = $ 2.10

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		0.60%
Ahmed	0.00	0.60%	0.00
Carlos	0.00	0.60%	0.00
Jun	350.00	0.60%	2.10
Marie	0.00	0.60%	0.00
		Total	$            2.10

6. Employer's SUTA taxes : = $ 6.13

Employee	Earning subject to tax	Tax rate	Tax amount
Tax Rate		1.75%
Ahmed	0.00	1.75%	0.00
Carlos	0.00	1.75%	0.00
Jun	350.00	1.75%	6.13
Marie	0.00	1.75%	0.00
		Total	$            6.13

7. Each employee’s net (take-home) pay.

Employee	Ahmed	Carlos	Jun	Marie	Total
Gross Pay	$       2,500.00	$ 1,515.00	$       475.00	$ 1,000.00	$ 5,490.00
Less:
Income tax withholding	198.00	182.00	32.00	68.00	480.00
FICA -Social Security	99.20	93.93	29.45	62.00	284.58
FICA - Medicare	36.25	21.97	6.89	14.50	79.61
Health Insurance	20.00	20.00	20.00	20.00	80.00
Net Pay	$       2,146.55	$ 1,197.10	$       386.66	$     835.50	$ 4,565.81

8.  Employer’s total payroll-related expense for each employee :

Employee	Ahmed	Carlos	Jun	Marie	Total
Gross Pay	$       2,500.00	$ 1,515.00	$       475.00	$ 1,000.00	$ 5,490.00
Add:
FICA -Social Security	99.20	93.93	29.45	62.00	284.58
FICA - Medicare	36.25	21.97	6.89	14.50	79.61
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