Question

Calculate Social Security taxes, Medicare taxes, and FIT for Joy Royce. Joy's company pays her a monthly salary of $10,000. She is single and claims 1 deduction. Before this payroll, Joy's cumulative earnings were $118,000. (Social Security maximum is 6.2% on $118,500, and Medicare is 1.45%.) Calculate FIT by the percentage method.

Jim Brewer, owner of Arrow Company, has three employees who earn $200, $800, and $950 a week. Assume a state SUTA rate of 5.1%. What will Jim pay for state and federal unemployment taxes for the first quarter?

Answer 1

Computation of FIT by Percentage Method

Gross annual salary = Monthly salary x 12 = $10000 x 12 = $120,000

Social security taxes = 0.062 x $118,500 = $7347

Medicare = 0.0145 x $120000 = $1740

FIT as per tax slabs for 2017 = 18713.75 + 28% X (120000- 91900) = $25739

Computation of Jim Liablity for State and federal unemployment

Earning of Employees in Quarter

Employee1:($200*12 Week)=$2400

Employee2:($800*12 Week)=$9600

Employee3:($950*12 Week)=$11400

Federal unemployment Tax applies to the first $7000 Paid to Each employee

FUTA Tax Rate =6%-5.10%=0.90%

SUTA( Given)=5.1%

Hence Tax Liability,

Employee1:- ($2400*0.90%)=$21.60

Employee2: ($7000*0.90%)= $63

Employee3: ($7000*0.90%)=$63