ABC Consulting had two employees with the following earnings information: Use the table above and calculate the employer payroll income taxes associated with Henry's December 15 paycheck given the following tax rates: Social Security tax of 6.2% is levied on the first $113,700 of annual wages and the Medicare tax rate is 1.45% on all earnings.State unemployment tax of 5.4% and federal unemployment tax of .6% are both levied on only the first $7,000 of each employee's annual earnings.

Question

ABC Consulting had two employees with the following earnings information:  Use the table above and calculate the employer payroll income taxes associated with Henry's December 15 paycheck given the following tax rates: Social Security tax of 6.2% is levied on the first $113,700 of annual wages and the Medicare tax rate is 1.45% on all earnings.State unemployment tax of 5.4% and federal unemployment tax of .6% are both levied on only the first $7,000 of each employee's annual earnings.

Quizplus · Accepted Answer

To calculate the employer payroll income taxes associated with Henry's December 15th paycheck, we need to first find his gross pay for the pay period, which is $3,000.

Next, we need to calculate the Social Security tax and Medicare tax.

For the Social Security tax, we only need to consider the first $3,000 of Henry's annual wages since it is the amount he earned in this pay period. The tax rate is 6.2%, so the amount of Social Security tax to be paid by the employer is $186 ($3,000 x 6.2%).

For the Medicare tax, we need to consider the entire $3,000 since there is no wage limit for Medicare tax. The tax rate is 1.45%, so the amount of Medicare tax to be paid by the employer is $43.50 ($3,000 x 1.45%).

Finally, we need to calculate the state and federal unemployment taxes. These taxes are levied on only the first $7,000 of each employee's annual earnings. Since Henry earned $3,000 in this pay period, he has not yet reached the $7,000 threshold for either tax. Therefore, the employer will need to pay the state unemployment tax of 5.4% on Henry's $3,000 earnings, which comes out to $162.

Adding up all of these taxes, we get a total of $391.50. However, since the employer gets to take a tax credit for the state unemployment tax paid, the final amount of employer payroll income taxes associated with Henry's December 15th paycheck is $194.40.

ABC Consulting Had Two Employees with the Following Earnings Information