Financial Accounting

timer Asked: Jul 4th, 2015

Question description

 The employee payroll records indicate the following total earnings for 2 employees through the pay period ending December 10. 

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. 

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