Question

Paloma Co. has four employees. FICA Social Security taxes are 6.2% of the first $127,200 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company’s FUTA taxes are 3.5% and SUTA taxes are 2.5%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company’s four employees. Current Week Name Gross Pay through Aug. 18 Gross Pay Income Tax Withholding Dali $ 126,100 $ 2,000 $ 284 Trey 126,300 900 145 Kiesha 6,900 450 39 Chee 1,250 400 30 In addition to gross pay, the company must pay two-thirds of the $60 per employee weekly health insurance; each employee pays the remaining one-third. The company also contributes an extra 8% of each employee’s gross pay (at no cost to employees) to a pension fund. Required: Compute the following for the week ended August 25.

Answer 1

The question involves calculating payroll expenses for Paloma Co., including various taxes and contributions for employee benefits. Taxes include FICA Social Security and Medicare, FUTA, and SUTA. The company also contributes to health insurance and a pension fund.

Step-by-step explanation:

The task involves calculating the employer's payroll expenses for Paloma Co., which include deductions for FICA Social Security taxes, FICA Medicare taxes, the federal unemployment tax (FUTA), and the state unemployment tax (SUTA), along with contributions to healthcare insurance and a pension fund for its employees.

Each employee's gross pay for the current week must be analyzed to determine the relevant taxes and contributions. For example, FICA Social Security taxes are 6.2% of the annual gross pay up to $127,200, while FICA Medicare taxes are 1.45% of the gross pay with no cap. Only the first $7,000 of each employee's gross pay is subject to FUTA taxes (3.5%) and SUTA taxes (2.5%). Additionally, Paloma Co. pays two-thirds of each employee's $60 weekly health insurance premium and contributes an extra 8% of gross pay to a pension fund.

For instance, if an employee's gross pay for the week is $2,000, the employer will calculate the FICA Social Security tax as $2,000 x 6.2% = $124. The FICA Medicare tax would be $2,000 x 1.45% = $29. Factors like whether the employee has reached the $7,000 threshold for FUTA/SUTA taxes or the $127,200 cap for Social Security must also be considered.