Question

Wage and Tax Statement Data on Employer FICA Tax

Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees' earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

Employee	Date First Employed	Monthly Salary		Monthly Income Tax Withheld
Arnett	Jan. 2	$3,200		$448
Cruz	Oct. 1	5,400		972
Edwards	Apr. 16	2,700		338
Harvin	Nov. 1	2,400		300
Nicks	Jan. 16	5,800		1,305
Shiancoe	Dec. 1	3,400		527
Ward	Feb. 1	6,400		1,376

Required:

1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

Employee	Gross Earnings		Federal Income Tax Withheld		Social Security Tax Withheld		Medicare Tax Withheld
Arnett	$		$		$		$
Cruz
Edwards
Harvin
Nicks
Shiancoe
Ward
					$		$

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee’s earnings; (e) total.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

(a)	$
(b)	$
(c)	$
(d)	$
(e)	$

Answer 1

	1.Amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8.
Employee	Date Employed	No.of months To Dec.31	Monthly Salary	Gross Earnings	Mthly. Federal Income Tax Withheld	Total tax with-held	Social Security Tax withheld	Medicare Tax withheld	Net Earnings
	1	2	3	4=2*3	5	6=2*5	7=4*6%	8=4*1.5%	9=4-6-7-8
Arnett	Jan. 2	12	3200	38400	448	5376	2304	576	30144
Cruz	Oct. 1	3	5400	16200	972	2916	972	243	12069
Edwards	Apr. 16	8.5	2700	22950	338	2873	1377	344.25	18355.75
Harvin	Nov. 1	2	2400	4800	300	600	288	72	3840
Nicks	Jan. 16	11.5	5800	66700	1305	15008	4002	1001	46690
Shiancoe	Dec. 1	1	3400	3400	527	527	204	51	2618
Ward	Feb. 1	11	6400	70400	1376	15136	4224	1056	49984
TOTAL				222850		42436	13371	3343	163701

2.       Employer Payroll taxes
(a) social security	(b) Medicare	(c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings	(d) federal unemployment compensation at 0.6% on the first $10,000 of each employee’s earnings;	(e) total.
a	b	c	d	e
2304	576	540	60	3480
972	243	540	60	1815
1377	344	540	60	2321
288	72	259	29	648
4002	1001	540	60	5603
204	51	184	20	459
4224	1056	540	60	5880
13371	3343	3143	349	20206