Page 62 - Account for Ag - 2019

10-4 Accounting for Agriculture CH 10]

Figuring the Tax. The federal unemployment tax is figured on the first $7,000 in wages paid to each
employee during the year. This $7,000 maximum is scheduled as a tax on the employer and must not be deducted
from the wages of the employee.

As an example: In November of the year you hired Al Green and pay him $3,500 in wages before the year
end. All $3,500 is subject to the federal unemployment tax. The first $7,000 paid him in the year is also subject to
the tax. Al's total wages for the year reach the $7,000 mark in mid-March. None of the wages the employer paid
him after that in the year is subject to the tax.

Then, in July, Al quits his job, and is replaced by someone else. The first $7,000 paid his replacement in the
year is also subject to the tax.

Exemption: The gross federal unemployment tax rate for the year is 6.2%. An employer is allowed to reduce
the federal rate and given a credit of up to 5.4% for the state unemployment tax an employer pays in those states
requiring state unemployment tax. The net federal tax rate can be as low as .8% ( 6.2% - 5.4% ).

FEDERAL INCOME TAX. Except for certain types of employment, all employers are required to deduct a
portion of the earnings of their employees for federal income tax purposes. As a part of the pay-as-you-go system
of paying income taxes, it is frequently referred to as the withholding tax. The amount to be withheld varies with
the amount of earnings and the number of exemptions to which the employee is entitled. An exemption is allowed
for the worker, for each person that qualifies as a dependent, and for the worker's wife, unless she is also employed
and claims her own exemption. Additional exemptions are allowed to the worker and his wife for old age (65 or
older) and for blindness. Every employee is required to inform his employer of his status in this respect by
submitting a withholding exemption certificate.

The amount of the tax to be withheld from the earnings of each employee is calculated by taking into account
the amount of his earnings, the length of the pay period, the number of exemptions claimed, and the tax rates
currently in force. Many employers find it expedient to consult withholding tables prepared by the government.
From a table for the appropriate pay period (daily, weekly, biweekly, semimonthly, monthly, etc.) the amount of
tax to be withheld can be found for any amount of earnings and any number of exemptions.

Weekly Payroll Period—Employee Married
And the Number of withholding claimed is -
And the 10 or
Wages Are - 0 1 2 3 4 5 6 7 8 9 more
At But Less
Least than The Amount of Income tax to be withheld shall be-
$300 $310 $37 $31 $26 $20 $14 $9 $3 $0 $0 $0 $0
310 320 38 33 27 22 16 10 5 0 0 0 0
320 330 40 34 29 23 17 12 6 1 0 0 0
330 340 41 36 30 25 19 13 8 2 0 0 0
340 350 43 37 32 26 20 15 9 4 0 0 0
350 360 44 39 33 28 22 16 11 5 0 0 0
360 370 46 40 35 29 23 18 12 7 1 0 0
370 380 47 42 36 31 25 19 14 8 2 0 0
380 390 49 43 38 32 26 21 15 10 4 0 0
390 400 50 45 39 34 28 22 17 11 5 0 0
400 410 52 46 41 35 29 24 18 13 7 1 0
410 420 53 48 42 37 31 25 20 14 8 3 0
420 430 55 49 44 38 32 27 21 16 10 4 0

Illustration 10-1
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