Question

The total wage expense for Kin Co. was $166,000, Of this total, $24,000 was above the OASDI wage base limit and not subject to this tax. Ali eamings are sucject to Maceare tares, and 354,000 was above the federal and state unemployment wage base imits and not subject to unemployment taxes. Please calculate and ipumalze the total payroll tax expense for Kin Co. given the folowing tases and wage bese lmits:

a. FICA tax rate: OASDI, 6.2% with a wage base limit of $127,200; Medicare, 1.45% with no wage base limit
b. State unemployment tax rate 5.4% with a wage base limit of $7,000
c. Federal unemployment tax rate (after credit): 0.6% with a wage base limit of $7,000.
Calculate the total payroll tax expense for Kiln Co.

Answer 1

The total payroll tax expense for Kin Co. is calculated by applying the specified tax rates to wage amounts under the respective wage base limits resulting in a combined tax liability of $17,939.

Step-by-step explanation:

To calculate the total payroll tax expense for Kin Co., we need to compute each component based on the provided rates and wage base limits.

• OASDI tax: Apply 6.2% to earnings up to the wage base limit of $127,200. Since $24,000 is above this limit, subtract it from total wages to find the taxable amount.
• Medicare tax: Apply 1.45% to all earnings since there's no wage base limit.
• State unemployment tax (SUTA): Apply 5.4% to earnings up to $7,000. Since $54,000 is above the state unemployment wage base limit, only a portion of the wages are subject to this tax.
• Federal unemployment tax (FUTA): Apply 0.6% to earnings up to $7,000. The same portion of wages subject to SUTA also applies to FUTA.

Now, we can calculate each tax:

1. OASDI Tax = 6.2% of ($166,000 - $24,000) = $8,812
2. Medicare Tax = 1.45% of $166,000 = $2,407
3. SUTA Tax = 5.4% of ($166,000 - $54,000) = $6,048
4. FUTA Tax = 0.6% of ($166,000 - $54,000) = $672

Summing these amounts gives us the total payroll tax expense for Kin Co.: $8,812 (OASDI) + $2,407 (Medicare) + $6,048 (SUTA) + $672 (FUTA) = $17,939.