Question

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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	$3,400		$476
Cruz	Oct. 1	5,300		954
Edwards	Apr. 16	2,400		300
Harvin	Nov. 1	2,400		300
Nicks	Jan. 16	5,650		1,271
Shiancoe	Dec. 1	3,500		543
Ward	Feb. 1	6,500		1,398

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)	$

Answer 1

Employee	Gross Earnings G	Federal Income tax witheld	Social security tax witheld (6%*G upto $118500 gross earnings	Medicare taxes withheld G*1.5%
Arnett	40800	5712	2448	612
	(3400*12)	(476*12)
Cruz	15900	2862	954	238.5
	(5300*3)	(954*3)
Edwards	20400	2550	1224	306
	(2400*8.5)	(300*8.5)
Harvin	4800	600	288	72
	(2400*2)	(300*2)
Nicks	64975	14616.5	3898.5	974.63
	(5650*11.5)	(1271*11.5)
Shaincoe	3500	543	210	52.5
	(3500*1)	(543*1)
Ward	71500	15378	4290	1072.5
	(6500*11)	(1398*11)
Total	221875	42261.5	13312.5	3328.13
2)
Employer payroll taxes
a)Social sec. Tax		13312.5
b)Medicare Tax		3328.13
c)State Unemployment compensation tax on first $10000
((10000*5)+(4800+3500))*5.4%		3148.2
d)Federal Unemployment compensation tax on first $10000
((10000*5)+(4800+3500))*.6%		349.8
e)Total		3498