Question

An employee died in March with total YTD wages of $45,000.00 and was owed $1,000.00 for a bonus (the company uses the Optional Flat Rate Method to tax supplemental wages). Calculate the federal income, social security and Medicare taxes that must be withheld from the bonus payment to the deceased employee's estate if the bonus is paid in June of the year of the employee's death.

Answer 1

To calculate the federal income, social security, and Medicare taxes that must be withheld from the bonus payment to the deceased employee's estate, apply the appropriate tax rates. The federal income tax rate for bonuses is based on the Optional Flat Rate Method. The Social Security tax rate is 6.2% and the Medicare tax rate is 1.45%.

Step-by-step explanation:

To calculate the federal income, social security, and Medicare taxes that must be withheld from the bonus payment to the deceased employee's estate, we need to apply the appropriate tax rates to the bonus amount.

The Optional Flat Rate Method is used to tax supplemental wages, which includes bonuses. Under this method, the federal income tax rate is 22% for supplemental wages up to $1 million. For amounts exceeding $1 million, the federal income tax rate is 37%.

The Social Security tax rate is 6.2% of the bonus amount, and the Medicare tax rate is 1.45%.