Portia Grant is an employee who is paid monthly. For the month
of January of the current year, she earned a total of $8,938. The
FICA tax for social security is 6.2% and the FICA tax rate for
Medicare is 1.45%. The FUTA tax rate of 0.8% and the SUTA tax rate
of 5.4% are applied to the first $7,000 of an employee's pay. The
amount of federal income tax withheld from her earnings was
$1,483.07. What is the total amount of taxes withheld from the
Portia's earnings?
Answer
General guidance
Payroll Taxes: The taxes which an employer is required to withhold and/or to pay based on their employee’s salaries are known as payroll taxes.
Payroll Withholding Deduction: The amounts which are withheld by the employer from employees’ pay to deduct taxes like federal income tax, state income tax, local income tax and social security tax are called as payroll withholding deduction.
Payroll Expenses: The costs incurred by an employer to pay the employee for his labor, including other employee benefits, plus the payroll taxes the employer pays to the government are called payroll expenses.
Income tax withholding: The amounts which are withheld by the employer from employees’ pay to deduct federal income tax are called as federal income tax withholding.
Federal Insurance Contributions Act (FICA) tax withholding: The amounts which are withheld by the employer from employees’ pay to deduct social security and Medicare tax are called as FICA tax withholding.
FUTA tax: The term FUTA stands for Federal Unemployment Tax. Net FUTA tax rate is 0.6%, which is effective from January 1, 2008. Based on the taxable base and net FUTA tax rate net FUTA tax is determined. The following formula is used for calculating net FUTA tax.
SUTA tax: The term SUTA stands for State Unemployment Tax. It is coming under the category of payroll taxes. Based on the taxable base and SUTA tax rate SUTA tax is determined. The following formula is used for calculating SUTA tax.
Step-by-step
Step 1 of 2
Compute the FICA taxes as follows:
Total FICA Taxes are computed as follows:
On the amount earned FICA tax for Social Security and Medicare is computed at 6.2% and 1.45%. It is a self-employment tax as the employers and employees have to contribute for the FICA tax. Employees are required to pay FICA taxes on their wages. The Social Security tax rate for employees is 6.2% of their salary or wages. The Medicare tax rate for employees is 1.45% on salary or wages up to $200,000. Hence, E is FICA tax rate would be 7.65%
and the FICA taxes are $683.76.
Step 2 of 2
Compute the total amount of taxes withheld from the Portia’s Total Earnings as follows:
Total amount of taxes withheld from the Portia’s Total Earnings are $2,166.83.
Total amount of taxes withheld from the Portia’s Earnings is the sum of federal income tax withheld from earnings and total FICA taxes from Social security and Medicare. Sum of both results in $2,166.83.
Answer
Total amount of taxes withheld from the Portia’s Total Earnings are $2,166.83.
Answer only
Total amount of taxes withheld from the Portia’s Total Earnings are $2,166.83.