Kristy Casey earns $39,000 per year and is paid once a month. For January, she had $188 withheld from her pay for federal income taxes, and $52 withheld for health insurance. Social Security tax is 6.2% on a maximum of $122,700 of gross wages per year, and Medicare tax is 1.45%; the federal unemployment tax rate is 0.6% and state unemployment tax rate is 4.2%. What is the total employer payroll tax expense for Kristy's January paycheck?

Question

Quizplus · Accepted Answer

First, we need to calculate Kristy's gross pay for January:

$39,000/year ÷ 12 months/year = $3,250/month

Next, we need to calculate Kristy's Social Security and Medicare taxes:

Social Security tax: 6.2% of $122,700/year = $7,650/year maximum 
$3,250/month x 12 months/year = $39,000/year (Kristy's gross pay is below the maximum) 
6.2% x $3,250 = $201.50/year 
$201.50/year ÷ 12 months/year = $16.79/month

Medicare tax: 1.45% of $39,000/year = $565.50/year 
$565.50/year ÷ 12 months/year = $47.13/month

Now we can calculate Kristy's total employer payroll tax expense:

Social Security tax: $16.79 
Medicare tax: $47.13 
Federal unemployment tax: $3,250 x 0.006 = $19.50 
State unemployment tax: $3,250 x 0.042 = $136.50/year 
$136.50/year ÷ 12 months/year = $11.38/month

Total employer payroll tax expense: 
$16.79 + $47.13 + $19.50 + $11.38 = $94.80

In addition to the taxes, Kristy also had $188 withheld for federal income taxes and $52 withheld for health insurance, so her total deductions for the month were: 
$188 + $52 = $240

Therefore, Kristy's January paycheck would be: 
$3,250 - $240 - $94.80 = $2,915.20

The total employer payroll tax expense for Kristy's January paycheck is $94.80. However, the question asks for the total employer payroll tax expense, not the total taxes withheld from Kristy's paycheck, so we need to choose the best option that reflects this. Option B is the correct choice as it includes all payroll taxes for Kristy's paycheck.

Kristy Casey Earns $39,000 Per Year and Is Paid Once