Question

The total payroll for all it's employees for A company was $172,000 for the current month. The FICA-Social security rate is 6.2%, Medicare tax rate is 1.45%. None of the employees have reached the limit for FICA taxes. Only $42,000 of the payroll is subject to unemployment taxes. The FUTA rate is 0.8% and SUTA rate is 2.9% of gross salary for all employees. In addition, employee federal income taxes are $43,000 and employee medical insurance deductions are $15,000. Given these facts what is the amount recorded by the company for Payroll Tax expense for the current month? Please explain how you determined your answer.

A. $72,712 B. $14,712 C. $19,522 D. $99,288

Answer 1

Payroll tax expense forms liability and that is to be paid by the employer. This includes Social Security tax, Medicare tax, FUTA, and SUTA only. No other taxes are relevant here.

Payroll tax expense = Social Security + Medicare + FUTA + SUTA

                                    = (172,000 × 6.2%) + (172,000 × 1.45%) + (42,000 × 0.8%) + (42,000 × 2.9%)

                                    = 10,664 + 2,494 + 336 + 1,218

                                    = 14,712

Answer: B