Question

Sky Co. employed Tom Mills in Year 1. Tom earned $9,400 per month and worked the entire year. Assume the Social Security tax rate is 6 percent for the first $110,000 of earnings, and the Medicare tax rate is 1.5 percent. Tom’s federal income tax withholding amount is $930 per month. Use 5.4 percent for the state unemployment tax rate and .6 percent for the federal unemployment tax rate on the first $7,000 of earnings per employee. Answer the following questions.

1. What is Tom’s net pay per month?

2. What amount does Tom pay monthly in FICA payroll taxes?

3. What is the total payroll tax expense for Sky Co. for January Year 1? February Year 1? March Year 1? December Year 1?

Answer 1

Answer :

(1). Net pay per month

		Jan to Nov		December
Gross pay		$9,400		$9,400
Less :
Federal withholding taxes	$930		$930
FICA social security - 6%	$564		$396
FICA Medicare - 1.5%	$141		$141
Total withholding		$1,635		41,467
Net Pay		$7,765		$7,933

(2). Monthly FICA payroll Taxes

	Jan to Nov	December
FICA social security	$564	$396
FICA Medicare tax	$141	$141
Monthly FICA payroll taxes	$705	$537

(3). Total payroll tax expense

	January	February	March	December
FICA Social security	$564	$564	$564	$396
FICA Medicare tax	$141	$141	$141	$141
Employer Federal unemployment tax	$42
Employer State unemployment tax	$378
Total payroll tax	$1,125	$705	$705	$537

* First $7,000 earning only

December month

Total salary for the year	$112,800
Salary till November	$103,400
FICA social security tax limit	$110,000
December social security tax on	$6,600
FICA social security - 6%	$396