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 4.4%. 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)$461.90
E)$230.00

Question

Quizplus · Accepted Answer

The employer's payroll taxes expense includes Social Security, Medicare, FUTA, and SUTA taxes. For February, Social Security tax is 6.2% of $4,600 = $285.20. Medicare tax is 1.45% of $4,600 = $66.70. FUTA and SUTA are applied to the first $7,000 of earnings. Since cumulative earnings are $4,800, only $2,200 of February's earnings are subject to FUTA and SUTA. FUTA tax is 0.6% of $2,200 = $13.20. SUTA tax is 4.4% of $2,200 = $96.80. Total payroll taxes expense = $285.20 + $66.70 + $13.20 + $96.80 = $461.90.

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