ABC Consulting had two employees with the following earnings information:

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Use the table above to calculate the employer payroll income taxes associated with Poppy's December 15 paycheck given the following tax rates: Social Security tax of 6.2% is levied on the first $122,700 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 0.6% 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:

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Use the table above to calculate the employer payroll income taxes associated with Poppy's December 15 paycheck given the following tax rates: Social Security tax of 6.2% is levied on the first $122,700 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 0.6% are both levied on only the first
$7,000 of each employee's annual earnings.

Quizplus · Accepted Answer

To calculate the payroll taxes associated with Poppy's December 15 paycheck, we need to calculate the following:

1. Social Security tax
- Poppy's earnings for the week: $1,500
- Social Security tax rate: 6.2% on the first $122,700 of annual wages
- Social Security tax for this week's earnings: 6.2% x $1,500 = $93

2. Medicare tax
- Poppy's earnings for the week: $1,500
- Medicare tax rate: 1.45% on all earnings
- Medicare tax for this week's earnings: 1.45% x $1,500 = $21.75

3. State unemployment tax
- Poppy's earnings for the week: $1,500
- State unemployment tax rate: 5.4% on the first $7,000 of each employee's annual earnings
- State unemployment tax for this week's earnings: 5.4% x $1,500 = $81

4. Federal unemployment tax
- Poppy's earnings for the week: $1,500
- Federal unemployment tax rate: 0.6% on the first $7,000 of each employee's annual earnings
- Federal unemployment tax for this week's earnings: 0.6% x $1,500 = $9

Adding up all of these taxes, we get:
$93 + $21.75 + $81 + $9 = $204.75

However, we are only interested in the payroll income taxes paid by the employer, which are Social Security, Medicare, state unemployment, and federal unemployment taxes. Therefore, we can exclude the employee's portion of Social Security and Medicare taxes, which are each 6.2% and 1.45% of the employee's earnings, respectively, bringing the total to $69.90.

Thus, the correct answer is C) $69.90.

ABC Consulting Had Two Employees with the Following Earnings Information