Question

Help on this problem would be immensely appreciated.

Instructions Continuing Payroll Problem: Chapter 3 As you learned in the previous chapter, Kipley Company is a small manufacturing firm located in Pittsburgh, Pennsylvania. The company has a workforce of both hourly and salaried employees. In the last chapter, gross wages were computed for each employee. Adjacent to their name, each employee's gross wages are shown in the Payroll Register. The next task is computing the FICA withholding for each employee and the employer's liability. Requirements: 1. Compute the OASDI for each employee. 2. Compute the HI for each employee. 3. On the Employer Register, compute the employer FICA liability. moter Room YOU ar answers to the mea

Answer 1

Payroll Register:

OASDI stands for Old-Age, Survivors and Disability Insurance Tax. It is set at 12.4% of gross wages earned by employee. The same has to be equally contributed by employee and employer, which means 6.2% each (i.e.) 6.2% will be deducted from employee wages and additionally 6.2% will be contributed from employer. For Year 2019, maximum annual wages up to which this tax is applicable is $ 132,900 (i.e.) any income earned by employee above this amount will not be considered for computing this tax and thus maximum OASDI contribution per annum from employee would be $ 8,239.80 only.

HI stands for Medicare's Hospital Insurance tax. It is set at 2.90% of gross wages earned by employee. The same has to be equally contributed by employee and employer, which means 1.45% each (same as OASDI). But in case of HI, there is no upper cap. Irrespective of the wages, this tax gets computed for employee and equally contributed by employer too.

Both OASDI & HI forms part of Social Security tax. Based on above explanation, please find below OASDI & HI calculations of payroll register. As this payroll register pertains to month of JANUARY, we need not check Cumulative or YTD wages, in order to know whether employee has reached OASDI threshold limit of $ 132,900.

Name	Gross	OASDI @ 6.2% (rounded off to 2 decimal places)	HI @ 1.45% (rounded off to 2 decimal places)
	A	A*6.2%	A*1.45%
Carson, F	700.00	43.40	10.15
Wilson W	897.04	55.62	13.01
Utley, M	678.75	42.08	9.84
Fife, L	877.10	54.38	12.72
Smith, L	790.00	48.98	11.46
Fay, G	539.15	33.43	7.82
Robey, G	623.08	38.63	9.03
Schork, T	773.08	47.93	11.21
Hardy, B	666.11	41.30	9.66
Kipley, C	1,000.00	62.00	14.50
Total	7,544.31	467.75	109.40

Employer Register:

As per above explanation, both OASDI & HI tax would be equally contributed from employer as well. Hence the above tax total amounts of employee applies for employer too:

Total

7,544.31

467.75

109.40

Thus, Employer FICA liability would be:

EmployeE portion of OASDI + EmployeE portion of HI+EmployeR portion of OASDI+EmployeR portion of HI

$ 467.75+109.4+467.75+109.4

= $ 1,154.30