Problem 9-2A Payroll expenses, withholdings, and taxes LO P2, P3
Paloma
Co. Stars has four employees. FICA Social Security taxes are 6.2% of
the first $110,100 paid to each employee, and FICA Medicare taxes are
1.45% of gross pay. Also, for the first $7,000 paid to each employee,
the company’s FUTA taxes are 0.8% and SUTA taxes are 2.15%. The company
is preparing its payroll calculations for the week ended August 25.
Payroll records show the following information for the company’s four
employees.
Current Week
Name
Gross Pay
through 8/18
Gross Pay
Income Tax Withholding
Dahlia
$
107,200
$
3,800
$
276
Trey
36,250
820
137
Kiesha
8,000
630
57
Chee
1,950
580
48
In
addition to gross pay, the company must pay one-half of the $60 per
employee weekly health insurance; each employee pays the remaining
one-half. The company also contributes an extra 8% of each employee’s
gross pay (at no cost to employees) to a pension fund.
Required:
Compute the following for the week ended August 25 (Round your answers to 2 decimal places.):
Explanation:
1. Each employee’s FICA withholdings for Social Security.
Dahlia
Trey
Kiesha
Chee
Total
Maximum base
$
110,100
$
110,100
$
110,100
$
110,100
Earned through 8/18
107,200
36,250
8,000
1,950
Amount subject to tax
$
2,900
$
73,850
$
102,100
$
108,150
Earned this week
$
3,800
$
820
$
630
$
580
Subject to tax
2,900
820
630
580
Tax rate
6.20
%
6.20
%
6.20
%
6.20
%
Social Security tax
$
179.80
$
50.84
$
39.06
$
35.96
$
305.66
2. Each employee’s FICA withholdings for Medicare.
Dahlia
Trey
Kiesha
Chee
Total
Earned this week
$
3,800
$
820
$
630
$
580
Tax rate
1.45
%
1.45
%
1.45
%
1.45
%
Medicare tax
$
55.10
$
11.89
$
9.14
$
8.41
$
84.54
3. Employer's FICA taxes for Social Security.
Dahlia
Trey
Kiesha
Chee
Total
Amount from Social Security
$
179.80
$
50.84
$
39.06
$
35.96
$
305.66
4. Employer's FICA taxes for Medicare.
Dahlia
Trey
Kiesha
Chee
Total
Amount from Medicare
$
55.10
$
11.89
$
9.14
$
8.41
$
84.54
5. Employer's FUTA taxes.
Dahlia
Trey
Kiesha
Chee
Total
Maximum base
$
7,000
$
7,000
$
7,000
$
7,000
Earned through 8/18
107,200
36,250
8,000
1,950
Amount subject to tax
0
0
0
5,050
Earned this week
$
3,800
$
820
$
630
$
580
Subject to tax
0
0
0
580
Tax rate
0.8
%
0.8
%
0.8
%
0.8
%
FUTA tax
$
0.00
$
0.00
$
0.00
$
4.64
$
4.64
6. Employer's SUTA taxes.
Dahlia
Trey
Kiesha
Chee
Total
Subject to tax (from 5)
$
0
$
0
$
0
$
580
Tax rate
2.15
%
2.15
%
2.15
%
2.15
%
SUTA tax
$
0.00
$
0.00
$
0.00
$
12.47
$
12.47
7. Each employee's net (take-home) pay.
Dahlia
Trey
Kiesha
Chee
Total
Gross earnings
$
3,800.00
$
820.00
$
630.00
$
580.00
$
5,830.00
Less
FICA Social Sec. tax
(179.80
)
(50.84
)
(39.06
)
(35.96
)
(305.66)
FICA Medicare taxes
(55.10
)
(11.89
)
(9.14
)
(8.41
)
(84.54)
Withholding taxes
(276.00
)
(137.00
)
(57.00
)
(48.00
)
(518.00)
Health insurance
(30.00
)
(30.00
)
(30.00
)
(30.00
)
(120.00)
Take-home pay
$
3,259.10
$
590.27
$
494.80
$
457.63
$
4,801.80
8. Employer's total payroll-related expense for each employee.
