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	$3,500		$490
Cruz	Oct. 1	5,500		990
Edwards	Apr. 16	2,600		325
Harvin	Nov. 1	2,200		275
Nicks	Jan. 16	5,650		1,271
Shiancoe	Dec. 1	3,800		589
Ward	Feb. 1	6,300		1,355

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)	$

Feedback

Consider each employee's date of hire. Remember there is a limit on how much the employer pays for state and feder

Answer 1

Employee	Date first employed	Gross earnings calculation	Gross earnings	Federal tax witheld	Social secutiry tax @6%	medicare tax @1.5%	net salary paid
Arnett	Jan 2	(3,500 x 30/31) + (3,500 x 11)	41,887	5,864	2513	628	32,882
Cruz	Oct 1	5,500 x 3	16,500	2,970	990	247.50	12,292.50
Edwards	Apr 16	(2,600 x 15/30) + (2600 x 8)	22,100	2762.50	1326	331.50	17680
Harvin	Nov 1	2,200 x 2	4,400	550	264	66	3520
Nicks	Jan 16	(5,650 x 15/30) + (5650 x 11)	64,975	14,616.50	3898.5	975	45,485
Shiancoe	Dec 1	3,800 x 1	3800	589	228	57	2926
Ward	Feb 1	6,300 x 11	69300	14905	4158	1039.50	49197.50
Total			222,962	42,257	13,377.50	3,344.50	163,983

Employer payroll taxes for the year

Taxes	Amount
Social security	13,377.50
Medicare tax	3,344.50
State unemplyment compensation	3,143
Federal unemplyment compensation	349
Total	20,214

Calculation of state and and federal unemployment tax

Employee	Gross earnings	State unemployment compensation	Federal unemplyment compensation
Arnett	41,887	540	60
Cruz	16,500	540	60
Edwards	22,100	540	60
Harvin	4,400	238	26
Nicks	64,975	540	60
Shiancoe	3800	205	23
Ward	69300	540	60
Total	222,962	3,143	349