An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 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. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

Question

Quizplus · Accepted Answer

Step 1: Calculate FICA Tax
- Social Security tax: 6.2% x $5,500 = $341
- Medicare tax: 1.45% x $5,500 = $79.75
Total FICA tax: $341 + $79.75 = $420.75

Step 2: Calculate FUTA and SUTA taxes
- FUTA tax: 0.6% x $7,000 = $42
- SUTA tax: 5.4% x $7,000 = $378
Total unemployment taxes: $42 + $378 = $420

Step 3: Calculate total payroll taxes
Total payroll taxes: $420.75 + $420 = $840.75

Step 4: Calculate net pay
Gross pay: $5,500
Federal income tax: $182
Health insurance: $150
Retirement plan: $75
Total voluntary deductions: $182 + $150 + $75 = $407
Net pay: $5,500 - $407 = $5,093

Step 5: Record payroll taxes expense
Payroll taxes expense: $840.75

An Employee Earns $5,500 Per Month Working for an Employer