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 $127,200 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

For the month of February, the employer's payroll taxes expense includes FICA taxes (both Social Security and Medicare) and unemployment taxes (FUTA and SUTA), but only on the first $7,000 of an employee's pay for unemployment taxes. The employee's cumulative earnings before February were $4,800, and they earned $4,600 in February, making their total earnings $9,400. However, for FUTA and SUTA, only the first $7,000 of the year's earnings are considered, and by February, the employee has exceeded this limit, meaning no FUTA or SUTA taxes are due for February's earnings.FICA Social Security tax = 6.2% of $4,600 = 0.062 * $4,600 = $285.20FICA Medicare tax = 1.45% of $4,600 = 0.0145 * $4,600 = $66.70FUTA tax = $0 (since the $7,000 limit for the year has been exceeded)SUTA tax = $0 (since the $7,000 limit for the year has been exceeded)Total payroll taxes expense for February = $285.20 (Social Security) + $66.70 (Medicare) = $351.90However, the correct calculation for the total payroll taxes expense should include the employer's portion of FICA taxes only, as FUTA and SUTA are not applicable beyond the $7,000 earnings threshold. The mistake in the explanation is in the final step of adding the taxes together, which should correctly account for the employer's actual tax responsibilities given the provided data and tax rates. The correct total payroll taxes expense calculation should reflect only the FICA taxes without FUTA and SUTA due to the earnings threshold being exceeded.

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