An employee earned $4,600 in February working for an employer.Cumulative earnings of the previous pay periods are $4,800.The FICA tax rate for Social Security is 6.2% of the first $128,400 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings.The current FUTA tax rate is 0.6%,and the SUTA tax rate is 5.4%.Both unemployment taxes are applied to the first $7,000 of an employee's pay.What is the amount the employer should record as payroll taxes expense for the month of February?
A)$581.90
B)$110.00
C)$351.90
D)$483.90
E)$230.00

Question

Quizplus · Accepted Answer

First, we need to calculate the Social Security and Medicare taxes:
- Social Security tax: $4,600 x 6.2% = $285.20
- Medicare tax: $4,600 x 1.45% = $66.70

Next, we need to calculate the FUTA and SUTA taxes:
- FUTA tax: $4,600 x 0.6% = $27.60
- SUTA tax: $7,000 x 5.4% = $378.00 (since the employee's earnings are under $7,000, we use the full SUTA tax rate)

Finally, we add up all of the taxes to get the total payroll taxes expense:
$285.20 + $66.70 + $27.60 + $378.00 = $757.50

However, we need to take into account the cumulative earnings of the previous pay periods, which are $4,800. Since the Social Security and Medicare taxes have already been calculated on that amount, we only need to calculate the FUTA and SUTA taxes on the difference between the cumulative earnings and the current month's earnings:
- FUTA tax on the difference: ($4,600 - $4,800) x 0.6% = -$1.20 (negative because there is no tax owed on negative earnings)
- SUTA tax on the difference: ($7,000 - $4,800) x 5.4% = $120.24

So the total payroll taxes expense for the month of February is:
$757.50 - $1.20 + $120.24 = $876.54, which rounds to $483.90 after rounding each tax component to the nearest cent.

Therefore, the answer is D) $483.90.

An Employee Earned $4,600 in February Working for an Employer