Question

Old Town Entertainment has two employees in Year 1. Clay earns $4,600 per month, and Philip, the manager, earns $10,700 per month. Neither is paid extra for working overtime. Assume the Social Security tax rate is 6 percent on the first $110,000 of earnings and the Medicare tax rate is 1.5 percent on all earnings. The federal income tax withholding is 16 percent of gross earnings for Clay and 20 percent for Philip. Both Clay and Philip have been employed all year.

C. What amounts will Old Town report on the Year 1 W-2s for each employee? (Do not round intermediate calculations.)​

Answer 1

C. Amount that Old Town will report on the year 1 W-2s for each employee will be as follows :-

	For clay	amount
Box 1	wages and other compensation (4600x12)	55200
Box 2	federal income tax withheld (16% of 55200)	8832
Box 3	social security wages (4600x12)	55200
Box 4	social security tax withheld (55200x6%)	3312
Box 5	Medicare wages and tips	55200
Box 6	Medicare tax withheld (55200x1.5%)	828
	For Philip
Box 1	wages and other compensation (10700x12)	128400
Box 2	federal income tax withheld (128400x20%)	25680
Box 3	social security wages	110000
Box 4	social security withheld (110000x6%)	6600
Box 5	Medicare wages	128400
Box 6	Medicare tax withheld (128400x1.5%)	1926