Question

Paloma Company has four employees. FICA Social Security taxes are 6.2% of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company’s FUTA taxes are 0.6% and SUTA taxes are 5.4%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company’s four employees.

Current Week
Name Gross Pay through August 18 Gross Pay Income Tax Withholding
Dali $ 125,300 $ 5,800 $ 398
Trey 134,700 3,000 395
Kiesha 7,900 2,000 46
Chee 1,850 1,600 36
In addition to gross pay, the company must pay one-half of the $76 per employee weekly health insurance; each employee pays the remaining one-half. The company also contributes an extra 8% of each employee’s gross pay (at no cost to employees) to a pension fund.
1. Please compute the employees FICA withholdings for social security
2. compute the employees FICA withholdings for medicare
3. compute employers taxes for social security
4. compute employers taxes for medicate
5. employees FUTA taxes
6.employers SUTA taxes

Answer 1

To compute FICA withholdings, multiply the gross pay by the respective tax rate. For the employer's taxes, use the maximum taxable amount. FUTA and SUTA taxes are calculated based on the gross pay.

Step-by-step explanation:

To compute the employees' FICA withholdings for Social Security, we need to multiply each employee's gross pay for the current week by the Social Security tax rate of 6.2%. For example, for Dali with a gross pay of $5,800, the FICA withholding for Social Security is $5,800 * 0.062 = $359.60. Similarly, the FICA withholdings for Medicare can be calculated by multiplying each employee's gross pay for the current week by the Medicare tax rate of 1.45%. For Dali, the FICA withholding for Medicare is $5,800 * 0.0145 = $84.10.

To compute the employer's taxes for Social Security, we need to apply the same tax rate of 6.2% to each employee's gross pay. The employer's taxes for Social Security can be calculated by multiplying $137,700 (the maximum amount subject to the tax) by the tax rate of 6.2% and then dividing it by the number of employees. To compute the employer's taxes for Medicare, we need to multiply each employee's gross pay for the current week by the Medicare tax rate of 1.45%.

The employees' FUTA taxes can be calculated by multiplying each employee's gross pay for the current week by the FUTA tax rate of 0.6% if the gross pay is less than or equal to $7,000. For example, for Kiesha with a gross pay of $2,000, the FUTA taxes are $2,000 * 0.006 = $12. The employer's SUTA taxes can be calculated by multiplying each employee's gross pay for the current week by the SUTA tax rate of 5.4%.