Question

Mike Smith is a college football coach making a base salary of $960,000 a year ($80,000 per month). Employers are required to withhold a 6.2% Social Security tax up to a maximum base amount and a 1.45% Medicare tax with no maximum. Unemployment taxes are 6.2% of the first $7,000 earned per employee.

1. Assuming the Social Security base amount is $128,400, compute how much will be withheld during the year for Coach Smith's Social Security and Medicare. (Round your answer to the nearest dollar amount.)

2.Through what month will Social Security be withheld?

A)February

2)March

3)April

4)May

3. What additional amount will the employer need to pay, assuming unemployment taxes of 6.2%? (Round your answer to the nearest dollar amount.)

Answer 1

1. Computation of withholding during the year for Coach Smith's Social Security and Medicare:

Withheld for	Maximum Base amount upto salary	Rate	Amount
	$		$
Social Security	128,400	6.20%	7,961
Medicare	960,000	1.45%	13,920
Total			21,881

2. Social Security will be withheld through February as $80,000 per month reaches the $128,400 maximum in the second month.

Therefore, option A i.e. February is the correct answer.

3. Computation of the additional amount will the employer need to pay:

Social Security and Medicare	From Part 1	21,881
Unemployment	$7,000*6.2%	434
Total		22,315