Question

Ken Gorman is a maitre d' at Carmel Dinner Club. On February 1, 20-- his gross pay was $800 (three days working, one paid vacation day, and one paid sick day). He also reported to his employer tips of $900 for the previous month (applicable taxes to be deducted out of this pay). Gorman belongs to the company's 401(k) plan and has 5% of his gross pay ($800) deducted each week (salary reduction). Carmel Dinner Club also provides a matching contribution ($40) into the plan for Gorman. Compute the following amounts:a. Deduction for OASDI tax

b. Deduction for HI tax

Answer 1

To calculate the deductions for OASDI (Social Security) and HI (Medicare) taxes, we need to determine the applicable tax rates and apply them to Ken Gorman's gross pay.

Here are the tax rates for 2021:

OASDI tax rate: 6.2% on the first $142,800 of wages.

HI tax rate: 1.45% on all wages.

a. Deduction for OASDI tax:

To calculate the deduction for OASDI tax, we need to multiply Ken Gorman's gross pay ($800) by the OASDI tax rate (6.2%):

OASDI tax deduction = $800 * 0.062 = $49.60

b. Deduction for HI tax:

To calculate the deduction for HI tax, we need to multiply Ken Gorman's gross pay ($800) by the HI tax rate (1.45%):

HI tax deduction = $800 * 0.0145 = $11.60

Therefore, the amounts are:

a. Deduction for OASDI tax: $49.60

b. Deduction for HI tax: $11.60