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 $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. What is the amount the employer should record as payroll taxes expense for the month of February?

Question

Quizplus · Accepted Answer

- Social Security tax (6.2% of $4,600): $285.20
- Medicare tax (1.45% of $4,600): $66.70
- FUTA tax (0.6% of $7,000): $42.00
- SUTA tax (5.4% of $7,000): $378.00
- Total payroll taxes expense: $285.20 + $66.70 + $42.00 + $378.00 = $772.90
- Since the employee had already earned $4,800 cumulatively prior to February, only $7,000 - $4,800 = $2,200 is subject to the two unemployment taxes.
- FUTA tax on $2,200: $2,200 x 0.6% = $13.20
- SUTA tax on $2,200: $2,200 x 5.4% = $118.80
- Adjusted payroll taxes expense: $772.90 - $13.20 - $118.80 = $641.90
- Therefore, the amount the employer should record as payroll taxes expense for the month of February is $483.90 (difference between $641.90 and $158 in Social Security and Medicare taxes already withheld from employee's paycheck).

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