Question

Use the following tax rates, ceiling and maximum taxes:
Employee and Employer OASDI:	6.20%	$127,200	$7,886.40
Employee* and Employer HI:	1.45%	No limit	No maximum
Self-employed OASDI:	12.4%	$127,200	$15,772.80
Self-employed HI:	2.9%	No limit	No maximum

*Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed.

Rounding Rules: Unless instructed otherwise compute hourly rate and overtime rates as follows:

Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the overtime rate).

If the third decimal place is 5 or more, round to the next higher cent.

If the third decimal place is less than 5, drop the third decimal place.

Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow.

On the last weekly pay of the first quarter, Lorenz is paid her current pay of $90 per day for four days worked and one day sick pay (total — $450). She is also paid her first-quarter commission of $1,200 in this pay. How much will be deducted for:
Round your answers to the nearest cent.

a. OASDI tax	$_______
b. HI tax	$_________

Answer 1

The maximum 2017 OASDI portion of the Federal Insurance Contributions Act tax payable by each employee is $7,886.40, or 6.2 percent of the wage base. For tax year 2017, the 6.2 percent applies to the employer tax rate on the first $127,200 of taxable wages paid to an employee in the year. The employee tax rate is also 6.2 percent.

For the Medicare (HI) portion of the FICA taxes, there is no wage base and all wages earned are subject to the HI tax, which also is paid by employers and employees. The 1.45 percent HI tax is applied to all wages earned in a tax year. In tax year 2017.

Total taxable wage:

Normal wage (90*5). 450

Commission. 1200

1650

a. OASDI tax(1650*0.062) =$102.30

b. HI tax(1650*0.0145). =$23. 93