Question

1) Carol works for ABC Company and earned $64,500 for the entire year 2018. How much in FUTA tax is her employer required to withhold in her name? Assume that the employer receives the maximum credit for state unemployment taxes.

Choices:

A) $0

B) $435.00

C) $46.40

D) $42.00

2) Alice is single and self-employed in 2020. Her net business profit on her Schedule C for the year is $158,000.

What is her self-employment tax liability and additional Medicare tax liability for 2020? (Round your final answer to the nearest whole dollar amount. Leave no answer blank. Enter zero if applicable.)

Self-Employment Tax Liability =

Additional Medicare Tax Liability =

3) Rasheed works for Company A, earning $360,000 in salary during 2020.

Assuming he is single and has no other sources of income, what amount of FICA tax will Rasheed pay for the year? (Round your intermediate and final answer to the nearest whole dollar amount.)

Amount of FICA Tax =

Answer 1

1. As of 2020, the FUTA tax rate was 6% of the first $7,000 paid to each employee annually. Once an employee’s year-to-date (YTD) wages exceed $7,000, an employer stops paying FUTA for that employee. Therefore, the maximum amount an employer pays in this tax is $420 per employee.

Employers can take a tax credit of up to 5.4% of taxable income if they pay state unemployment taxes. This amount is deducted from the amount of employee federal unemployment taxes owed.

FUTA Tax = 6% - 5.4% (Taxable income upto $ 7,000 per year)

= 0.6% of $ 7,000

= $ 42

Therefore answer is D) $ 42

2. The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

Generally, 92.35% of your net earnings from self-employment is subject to self-employment tax.

for 2020, only the first $137,700 of earnings was subject to the Social Security portion of self-employment tax

Social Security Tax =137,700* 12.4% = 17,075

Medicare tax = 158,000*92.35%*2.9% = 4,231

Total tax = $ 21,305

3.

Social Security Tax =137,700* 12.4% = 17,075

Medicare tax = 3,60,000*2.9% = $ 10,440

Total tax = $ 27,515

Employees half = 13,757

Additional medicare 0.9% of salary above $ 200,000 = 160.000*0.9% = $ 1,440