Question

Tax Return Problem 4 Jermaine Watson is a single father with a son, Jamal, who qualifies as a dependent. They live at 5678 SE Stark St., Portland, OR 97233. Jermaine 710 works at First Bank of Oregon. Jamal attends school and at the end of the school day he goes to a dependent care facility next door to his school where Jermaine picks him up after work. Jermaine pays $800 per month to the care facility (Portland Day Care, 4567 SE Stark St., Portland, OR 97233. EIN 90-6543210). Jermaine's W-2 from First Bank of Oregon is as follows: Wages (box 1) $61,500.00 Federal W/H (box 2) S 8,455.00 ocial security wages (box 3)- $61,500.00 Social security W/H (box 4) $ 3,813.00 Medicare wages (box 5)H$61,500.00 Medicare W/H (box 6)S 891.75

Answer 1

The employee tax rate for Social Security is 6.2% — and the employer tax rate for Social Security is also 6.2%. So, the total Social Security tax rate percentage is 12.4%. Only the employee portion of Social Security tax is withheld from your paycheck.

The 2018 wage-base limit is $118,500. If you earn more than that with one employer, you should only have Social Security taxes withheld up to that amount. If you have more than one employer and you earn more than that amount, you’ll receive an adjustment of any overpaid Social Security taxes on your return.

The employee tax rate for Medicare is 1.45% — and the employer tax rate is also 1.45%. So, the total Medicare tax rate percentage is 2.9%. Only the employee portion of Medicare taxes is withheld from your paycheck. There’s no wage-based limit for Medicare tax. All covered wages are subject to Medicare tax.

If you receive wages over $200,000 a year, your employer must withhold a .9% additional Medicare tax. This will apply to the wages over $200,000. This is on top of the 1.45% employer tax rate.

If you’re married, you might not have enough Medicare taxes withheld. If you’re married filing jointly with earned income over $250,000, you’re subject to an additional tax. This also applies to married filing separately if your income is over $125,000.

If this is the case, cover the additional Medicare taxes needed by:

• Adjusting your withholding
• Making estimated payments

Answer 2

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