Question

The monthly salaries for December and the year-to-date earnings as of November 30 for the three employees of the Lakeview Medical Center are listed below. Compute the amount of social security tax and Medicare tax to be withheld from each of the employee’s gross pay for December. Assume a 6.2 percent social security tax rate on a maximum of $122,700 for the calendar year. Assume a 1.45 percent Medicare tax rate. (Round your answers to 2 decimal places.)

Answer 1

The Social Security tax rate in the United States is currently 12.4%, but only half of this amount is paid by employees,

with the other half paid by the employer. If you're self-employed, you are considered to be both the employer and employee, so you pay the entire Social Security tax as part of your self-employment tax.

If you're self-employed, write down the lower of your net business income (this is line 31 on IRS Schedule C) or $127,200.

Multiply this amount by 12.4% to arrive at your total Social Security tax. Be aware that this is paid as part of your self-employment tax.

The latter also includes Medicare taxes, which adds another 2.9% of your net business income, not subject to any income maximum, with an additional 0.9% for high earners.

Therefore Socail Security Tax = $122700*6.2 %= $7607.4

Medical Tax rate =$122700*1.45% ==1779.15