Question

Alice is an employee of XYZ Inc. Alice’s annual compensation is $295,000. Alice’s filing status is married filing jointly. Her federal income tax withholding was $60,000.

Answer the following questions:

1. What is the total business deduction for XYZ Inc?

2. What is the total amount of taxes paid on behalf of Alice to the federal government for income taxes and payroll taxes?

3. What is the total amount of taxes withheld from Alice's paychecks for the year?

4. What is Alice's net pay for the year

Answer 1

All amounts are in $

Tax year is taken as 2020

So for Married and filing jointly tax payers

Social Security = 6.2% upto $137,700 each by Employee and Employer

Medicare = 1.45% upto $250,000 each by Employee and Employer

Medicare = 2.35% on compensation above $250,000 by Employee and 1.45% on compensation above $250,000 by emoloyer

Province is not given, assuming it as California

FUTA = 0.6% on first 7,000

SUTA = 3.4% on first 7,000

1)

Total business deductions for XYZ Inc

= annual compensation + employer contribution for social security and medicare + FUTA + SUTA

= 295,000 + 6.2% of 137,700 + 1.45% of 295,000 + 0.6% x 7,000 + 3.4% x 7,000

= 295,000 + 8,537.4 + 4,277.5 + 42 + 238

= 308,094.9

2)

Taxes paid on behalf of Alice

= Federal tax withholding + Employee contribution of social security and Medicare + FUTA + SUTA

= 60,000 + 6.2% x 137,700 + 1.45% x 250,000 + 2.35% x (295,000-250,000) + 42 + 238

= 60,000 + 8,537.4 + 3,625 + 1,057.5 + 42 + 238

= 73,499.9

3)

Total withholding from Employee pay

= Federal tax withholding + Employee social security and medicare

= 60,000 + 6.2% x 137,700 + 1.45% x 250,000 + 2.35% x (295,000-250,000)

= 60,000 + 8,537.4 + 3,625 + 1,057.5

= 73,219.9

4)

Alice net pay

= Compensation - total withholding

= 295,000 - 73,219.9

= 221,780.1