Question

Employee earnings records for Lily Company reveal the following gross earnings for four employees through the pay period of

December 15.
J. Seligman
R. Eby
$90,400
$114,300
For the pay period ending December 31, each employee's gross earnings is $4,500. The 7.65% FICA tax rate consists of the Social
Security tax rate of 6.20% on salaries and wages up to $128,400 and the Medicare tax rate of 1.45% on all salaries and wages.
J. Seligman $
Compute the FICA withholdings that should be made for each employee for the December 31 pay period. (Round answers to 2 decimal
places, e.g. 52.75.)
L. Marshall $
R. Eby
T. Olson
L. Marshall
T. Olson
$127,200
$130,500
$

Answer 1

Total FICA withholding: $279.00 (Social Security) + $65.25 (Medicare) = $344.25

Total FICA withholding: $74.40 (Social Security) + $65.25 (Medicare) = $139.65

Total FICA withholding for R. Eby and T. Olson is the same: $65.25 (Medicare only)

Step-by-step explanation:

To calculate the FICA withholdings for each employee for the December 31 pay period, we need to consider both the Social Security and Medicare tax rates. Here, the gross earnings of each employee and the FICA tax rate are crucial.

• The Social Security tax rate is 6.20% on salaries up to $128,400 for the year.
• The Medicare tax rate is 1.45% on all salaries and wages.
• Any earnings above $128,400 are not subject to Social Security tax but are still subject to the Medicare tax.

For J. Seligman with gross earnings of $90,400 and a pay period earning of $4,500:

• Social Security tax: $4,500 x 6.20% = $279.00
• Medicare tax: $4,500 x 1.45% = $65.25
• Total FICA withholding: $279.00 (Social Security) + $65.25 (Medicare) = $344.25

For L. Marshall with gross earnings of $127,200 and a pay period earning of $4,500 (note that this employee will surpass the Social Security wage base limit with this paycheck):

• Social Security tax: ($128,400 - $127,200) x 6.20% = $74.40
• Medicare tax: $4,500 x 1.45% = $65.25
• Total FICA withholding: $74.40 (Social Security) + $65.25 (Medicare) = $139.65

For R. Eby with gross earnings of $114,300 and a pay period earning of $4,500, and T. Olson with gross earnings of $130,500 and a pay period earning of $4,500 (who is already above the Social Security wage base limit and only subject to Medicare tax):

• Social Security tax: $0.00 (earnings exceed the wage base limit)
• Medicare tax: $4,500 x 1.45% = $65.25
• Total FICA withholding for R. Eby and T. Olson is the same: $65.25 (Medicare only)