In November, gross earnings at the Humpty Dumpty
Riding Company were $100,000. All
earnings are subject to 7.65% FICA taxes.
Federal income tax withheld was $20,000, and State income tax withheld
was $1,600. (1) Calculate net pay for November
and, (2) record the payroll.
In March, the payroll supervisor determines that
gross earnings for Horseless Carriage Rides are $120,000. All earnings are subject to 7.65% FICA taxes,
5.4% state unemployment taxes and, .8% Federal unemployment taxes. Journalize the employers payroll taxes.
The employee payroll records indicate the
following total earnings for 2 employees through the pay period ending December
Jim Smith $93,500 Lonnie Marshall $108,100
For the pay period ending December 31, 2015, each employees’
gross earnings are $4,500. The FICA tax
rate is 7.65% on earnings up to $110,100.
In other words, any income above $110,100 is not subject to FICA
tax. Though we are not concerned with
Medicare in this problem, Medicare is 1.45% of earnings with no limit.
Calculate the FICA withholdings that should be made for each
employee for December 31.
NOTE: For your information, I didn’t bring up the fact
that Social Security Tax is really 6.2% with the limit and Medicare is an
additional 1.45% for a total of 7.65%.
Medicare has no income limit.