Page 136 - CalcBus_Flipbook

14-10 Payrolls, Wages and Commissions CH 14]

Example C: For each employee calculate the FICA amounts for (a) Social Security tax, the
amount of (b) Medicare Tax (c) Additional Medicare Tax, (d) Employee Total FICA
tax, and (e) Employee Net Pay. Limitations: Maximum $132,900 Social Security.
Additional Medicare Tax on amounts over $200,000. Round to the nearest 1¢.
Note: If self employed then you send the Employee Total Tax to the IRS as you are
both employer and employee.
| —————————— FICA ————————— |
Social Security Medicare Additional Employee Employee
Employee Gross Security Medicare Medicare Total Net
No. Pay Tax Tax Tax Tax Pay
6.2% 1.45% 0.9%
$ $ $ $ $ $
(a) + (b) + (c) = (d) (e)
1. 56,000.00 __ 3,472.00 ______ 812.00 _____ 0.00 ___ 4,284.00 __ 51,716.00
2. 45,025.02 __ 2,791.55 ______ 652.86 _____ 0.00 ___ 3,444.41 __ 41,580.61
3. 28,412.56 __ 1,761.58 ______ 411.98 _____ 0.00 ___ 2,173.56 __ 26,239.00
4. 365,420.75 __ 8,239.80 ____ 5,298.60 _ 1,488.79 _ 15,027.19 _ 350,393.56

Employee Federal Income Tax Withholding
Benjamin Franklin (a founding father to the nation and a framer of the U.S. Constitution)
wrote in a 1789 letter that “Our new Constitution is now established, and has an appearance
that promises permanency; but in this world nothing can be said to be certain, except death and
taxes.” The federal government also levies a national income tax on earnings; 16th Amendment
to our Constitution. Amendment XVI Income Tax states that the Congress shall have power to
lay and collect taxes on incomes, from whatever source derived, without apportionment among
the several States, and without regard to any census or enumeration.
Another federal statute put into place by Congress, thus is required by law, is the payroll
withholding tax on earnings and these monies are forwarded to the Internal Revenue Service. The
employer is required by law to withhold this tax from the employees earnings. The amount of tax
that must be paid by an employee is based on (1) the amount of earnings and (2) number of
exemptions the employee claims. If the worker is single and has no dependents, one exemption
may be claimed. A married employee who has three dependent children may claim five
exemptions — one for himself, one for their spouse who has not claimed an exemption on a
separate tax return, and one for each child.

Federal Income Tax Withholding Tables. Although their use is not mandatory, income tax
withholding tables are provided by the Internal Revenue Service. IRS Table 14.1, “Table 1 --
Weekly payroll period”, shows the amount of income tax withholding in two columns, one for a
Single person and the other for a Married Person. As many employees are paid weekly, portions
of such tables for weekly payroll periods are stated. To determine the amount of income tax by
using a table on page 14-9:

1. Read down the wages column on the left until the appropriate wage-bracket line is
reached.
2. Read across on the same line to the column headed by the number of exemptions
claimed by the taxpayer.

Example A: Use Table 14.1 “Weekly Payroll Period” to determine how much income tax
should be deducted from Sam Stephens weekly earnings of $1,275 as he is
married and has two dependent children.

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