Question

1. An employer has one employee who earned $4,000 his first month of employment. The employee’s federal income tax withholding (FITW) is $600, and the employee has voluntary monthly deductions of $350 for health insurance and $50 for union dues. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employer's FUTA tax rate is 0.6% and the SUTA tax rate is 5.4%. (Note: The limit for FICA Social Security is $128,400 and there is no limit for FICA Medicare. The limit is $7,000 for FUTA and $9,000 for SUTA.) What are the employer’s payroll tax expense for the first month of the year?

A. $240

b. $306

c. $546

d. $834

2. An employer has one employee who earned $4,000 his first month of employment. The employee’s federal income tax withholding (FITW) is $600, and the employee has voluntary monthly deductions of $350 for health insurance and $50 for union dues. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The employer's FUTA tax rate is 0.6% and the SUTA tax rate is 5.4%. (Note: The limit for FICA Social Security is $128,400 and there is no limit for FICA Medicare. The limit is $7,000 for FUTA and $9,000 for SUTA.) What are the employee’s net pay for the first month of the year?

A. $2,694

b. $3,000

c. $3,600

d. $3,694

Answer 1

1
Social Security tax	248	=4000*6.2%
Medicare tax	58	=4000*1.45%
FUTA tax	24	=4000*0.6%
SUTA tax	216	=4000*5.4%
Employer’s payroll tax expense	546
Option C $546 is correct
2
Gross earnings	4000
Less: Deductions
Social Security tax	248	=4000*6.2%
Medicare tax	58	=4000*1.45%
Federal income tax withholding	600
Health insurance	350
Union dues	50
Total Deductions	1306
Net pay	2694
Option A $2,694 is correct