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Problem Set • A Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, use the following rates, ceiling, and maximum taxes. Employee and Employer OASDI:

6.20%

$132,900

$8,239.80

Employee* and Employer HI:

1.45%

No limit

No maximum

Self-employed OASDI:

12.4%

$132,900

$16,479.60

Self-employed HI:

2.9%

No limit

No maximum

For rounding rules, refer to Problem

Set • A page 2-35.

3-1A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 The biweekly taxable wages for the employees of Rite-Shop follow. Compute the FICA taxes for each employee and the employer’s FICA taxes.

ANSWER ↓

3-2A. LO 3 See Example 3-1 on page 3-11 During 20--, Rachael Parkins, president of Mathieson Company, was paid a semimonthly salary of $8,000. Compute the amount of FICA taxes that should be withheld from her:

OASDI

HI

a.

9th paycheck

$   

$   

b.

17th paycheck

$   

$   

c.

24th paycheck

$   

$   

d.

If Rachael Parkin’s year-to-date earnings as of her 24th paycheck are $192,000, and her year-end bonus is $100,000, how much is the additional 0.9% HI tax withheld?

$   

3-3A. LO 2, 3 See Example 3-1 on page 3-11 Ernie Gilmore began working as a part-time waiter on June 1, 20--, at Sporthouse Restaurant. The cash tips of $390 that he received during June were reported on Form 4070, which he submitted to his employer on July 3. During July, he was paid wages of $525 by the restaurant. Compute OASDI and HI:

OASDI

HI

a.

The amount of FICA taxes that the employer should withhold from Gilmore’s wages during July.

b.

The amount of the employer’s FICA taxes on Gilmore’s wages and tips during July.

ANSWER ↓

ANSWER ↓

$   

$   

3-4A. LO 2, 3 See Example 3-1 on page 3-11 Ken Gorman is a maitre d’ at Carmel Dinner Club. On February 1, 20-- his gross pay was $800 (three days working, one paid vacation day, and one paid sick day). He also reported to his employer tips of $900 for the previous month (applicable taxes to be deducted out of this pay). Gorman belongs to the company’s 401(k) plan and has 5% of his gross pay ($800) deducted each week (salary reduction). Carmel Dinner Club also provides a matching contribution ($40) into the plan for Gorman. This week’s pay would have a:

a.

Deduction for OASDI tax

$   

b.

Deduction for HI tax

$   

3-5A. LO 3 See Example 3-1 on page 3-11 In 20--, the annual salaries paid each of the officers of Abrew, Inc., follow. The officers are paid semimonthly on the 15th and the last day of the month. Compute the FICA taxes to be withheld from each officer’s pay on (a) November 15 and (b) December 31.

a. Name and Title Hanks, Timothy, President Grath, John, VP Finance

November 15 Annual Salary

OASDI Taxable Earnings

OASDI Tax

HI Taxable Earnings

HI Tax

$156,000

   

   

138,000

   

   

James, Sally, VP Sales

69,600

   

   

Kimmel, Joan, VP Mfg.

54,000

   

   

Wie, Pam, VP Personnel

51,600

   

   

Grant, Mary, VP Secretary

49,200

   

   

b. Name and Title Hanks, Timothy, President Grath, John, VP Finance James, Sally, VP Sales

December 31 Annual Salary

OASDI Taxable Earnings

OASDI Tax

HI Taxable Earnings

HI Tax

$156,000

  

  

138,000

  

  

69,600

  

  

Kimmel, Joan, VP Mfg.

54,000

  

  

Wie, Pam, VP Personnel

51,600

  

  

Grant, Mary, VP Secretary

49,200

  

  

ANSWER ↓

3-6A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 Audrey Martin and Beth James are partners in the Country Gift Shop, which employs the individuals listed below. Paychecks are distributed every Friday to all employees. Based on the information given, compute the amounts listed below for a weekly payroll period

period.

3-7A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 Volpe Corporation has only five employees who are all paid $850 per week. Compute the total FICA taxes that the employer would withhold from the five employees each week and the amount the company would pay as its own liability for the employer’s share of the FICA taxes on the weekly wages of the five employees:

Employees’ total OASDI

$   

Employees’ total HI

$   

Employer’s total OASDI

$   

Employer’s total HI

$   

ANSWER ↓

3-8A. LO 3 See Example 3-5 on page 3-13 Ralph Henwood was paid a salary of $64,600 during 20-- by Odesto Company. In addition, during the year Henwood started his own business as a public accountant and reported a net business income of $70,000 on his income tax return for 20--. Compute the following:

a. The amount of FICA taxes that was withheld from his earnings during 20-- by Odesto Company. b. Henwood’s self-employment taxes on the income derived from the public accounting business for 20--.

OASDI

$   

HI

$   

OASDI

$   

HI

$   

3-9A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 Empty Fields Company pays its salaried employees monthly on the last day of each month. The annual salary payroll for 20-- follows. Compute the following for the payroll of December 31:

ANSWER ↓

3-10A. LO 3 See Example 3-1 on page 3-11 The monthly and hourly wage schedule for the employees of Quirk, Inc., follows. No employees are due overtime pay. Compute the following for the last monthly pay of the year: a. The total wages of each part-time employee for December 20--. b. The OASDI and HI taxable wages for each employee. c. The FICA taxes withheld from each employee’s wages for December. d. Totals of columns. e. The employer’s FICA taxes for the month.

Employees

Total Monthly Payroll

OASDI Taxable Wages

OASDI Tax

HI Taxable Wages

HI Tax

Full-Time Office:  Adaiar, Gene

$2,450.00 

   

   

 Crup, Jason

2,300.00 

   

   

 Essex, Joan

2,975.00 

   

   

 Garza, Irma

2,985.00 

   

   

 Leason, Mel

2,900.00 

   

   

 Pruit, Marne

7,000.00 

   

   

 Rubble, Deanne

2,400.00 

   

   

 Simpson, Dick

3,985.00 

   

   

 Truap, Ann

5,000.00 

   

   

 Wilson, Trudy

2,440.00 

   

   

3-11A. LO 5 See Figure 3.8 on page 3-23 Cruz Company has gathered the information needed to complete its Form 941 for the quarter ended September 30, 20--. Using the information presented below, complete Part 1 of Form 941, reproduced on the next page. # of employees for pay period that included September 12—14 employees Wages paid third quarter—$79,750.17 Federal income tax withheld in the third quarter—$9,570.00 Taxable social security and Medicare wages—$79,750.17 Total tax deposits for the quarter—$21,771.83

ANSWER ↓

3-12A. LO 5 See Figure 3.8 on page 3-24 Refer to Problem 3-11A. Complete Parts 2, 4, and 5 of Form 941 (on page 3-43) for Cruz Company for the third quarter of 20--. Cruz Company is a monthly depositor with the following monthly tax liabilities for this quarter:

July

$7,193.10

August

7,000.95

September

7,577.78

State unemployment taxes are only paid to California. The company does not use a third-party designee, the tax returns are signed by the president, Carlos Cruz (Phone: 916-555-9739), and the date filed is October 31, 20--.

Source: Internal Revenue Service.

3-13A. LO 5 See Figure 3.8 on pages 3-23 and 3-24 Karen Kluster opened Lube and Wash on January 2, 20--. The business is subject to FICA taxes. At the end of the first quarter of 20-, Kluster, as president of the company, must file Form 941, Employer’s Quarterly Federal Tax Return. Using Form 941(Parts 1 through 5), reproduced on pages 3-45 and 3-46, prepare, sign, and date the return on the basis of the information shown below.

Employer’s address:

234 Oak, Austin, TX 78711-0234

Employer’s ID number:

00-0005874

Phone number:

(512)555-1111

Date filed:

April 30, 20--

Each employee is paid semimonthly on the 15th and last day of each month. Shown below is the payroll information for the first quarter of 20--. All pay periods were the same.

The total taxes per payday are:

None of the employees reported tips during the quarter.

i

Note: Lines 5a and 5c of Form 941, tax on total taxable wages, are computed by multiplying by the combined tax rate for

both employer and employee. Small differences due to rounding may occur between this total and the total taxes withheld from employees each pay period and the amount of the employer’s taxes calculated each pay period. This difference is reported on line 7 as a deduction or an addition as “Fractions of Cents.”

Source: Internal Revenue Service. ANSWER ↓

3-14A. LO 5 See Figure 3.8 on pages 3-23 and 3-24 During the third calendar quarter of 20--, Bayview Inn, owned by Diane R. Peters, employed the persons listed below. Also given are the employees’ salaries or wages and the amount of tips reported to the owner. The tips were reported by the 10th of each month. The federal income tax and FICA tax to be withheld from the tips were estimated by the owner and withheld equally over the 13 weekly pay periods. The employer’s portion of FICA tax on the tips was estimated as the same amount.

Employees are paid weekly on Friday. The following paydays occurred during this quarter:

July

August

September

5 weekly paydays

4 weekly paydays

4 weekly paydays

Taxes withheld for the 13 paydays in the third quarter follow:

Employees’ Federal Income Tax

Weekly FICA Taxes Withheld on Wages OASDI

$700 per week

Employees’  $500.65 Employer’s  500.65

HI

Weekly FICA Taxes on Tips OASDI

$117.11   Employees’  $48.07 117.09  

Employer’s  48.07

Based on the information given, complete Form 941 on the following pages for Diane R. Peters. Phone number: (901) 555-7959 Date filed: October 31, 20--

HI $11.24 11.24

Source: Internal Revenue Service.

3-15A. LO 4, 5 See Example 3-6 on page 3-20, see Figure 3.10 on page 3-26 The taxable wages and withheld taxes for Stafford Company (EIN 00-0001462), semiweekly depositor, for the first quarter of 20-follow.

a. Complete Schedule B of Form 941 on page 3-51 for the first quarter for Steve Hazelton, the owner of Stafford Company.

b. Using the calendar below, list the due dates of each deposit in the first quarter.

Paydays

Deposit Due Dates

January 15

1.  

January 31

2.  

February 15

3.  

February 28

4.  

March 15

5.  

March 29

6.  

ANSWER ↓

3-16A. LO 5 See Example 3-6 on page 3-20, Example 3-7 on page 3-29, Example 3-8 on page 3-31 Vulcan Company is a monthly depositor whose tax liability for March 20-- is $2,505.

1.

What is the due date for the deposit of these taxes?

2.

Assume that no deposit was made until April 29 (14 days late). Compute the following penalties:

   

a.

Penalty for failure to make timely deposit.

$   

b.

Penalty for failure to fully pay tax.

$   

c.

Interest on taxes due and unpaid (assume a 6% interest rate).

$   

d.

Total penalty imposed.

$   

Source: Internal Revenue Service.

3-17A. LO 2, 3 See Example 3-1 on page 3-11 At Vision Club Company, office workers are employed for a 40-hour workweek on either an annual or a monthly salary basis. Given on the form below are the current annual and monthly salary rates for five office workers for the week ended December 13, 20- (50th payday of the year). In addition, with this pay, these employees are paid their sliding-scale annual bonuses. The bonuses are listed on the register. For each worker, compute: 1. Regular earnings for the weekly payroll ended December 13, 20--. 2. Overtime earnings (if applicable). 3. Total regular, overtime earnings, and bonus. 4. FICA taxable wages for this pay period. 5. FICA taxes to be withheld for this pay period.

ANSWER ↓

Problem Set • A Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, use the following rates, ceiling, and maximum taxes.

Employee and Employer OASDI:

6.20%

$132,900

$8,239.80

Employee* and Employer HI:

1.45%

No limit

No maximum

Self-employed OASDI:

12.4%

$132,900

$16,479.60

Self-employed HI:

2.9%

No limit

No maximum

For rounding rules, refer to Problem

Set • A page 2-35.

3-1A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 The biweekly taxable wages for the employees of Rite-Shop follow. Compute the FICA taxes for each employee and the employer’s FICA taxes.

ANSWER ↓

3-2A. LO 3 See Example 3-1 on page 3-11 During 20--, Rachael Parkins, president of Mathieson Company, was paid a semimonthly salary of $8,000. Compute the amount of FICA taxes that should be withheld from her:

OASDI

HI

a.

9th paycheck

$   

$   

b.

17th paycheck

$   

$   

c.

24th paycheck

$   

$   

d.

If Rachael Parkin’s year-to-date earnings as of her 24th paycheck are $192,000, and her year-end bonus is $100,000, how much is the additional 0.9% HI tax withheld?

$   

3-3A. LO 2, 3 See Example 3-1 on page 3-11 Ernie Gilmore began working as a part-time waiter on June 1, 20--, at Sporthouse Restaurant. The cash tips of $390 that he received during June were reported on Form 4070, which he submitted to his employer on July 3. During July, he was paid wages of $525 by the restaurant. Compute OASDI and HI:

a.

The amount of FICA taxes that the employer should withhold from Gilmore’s wages during July.

b.

The amount of the employer’s FICA taxes on Gilmore’s wages and tips during July.

OASDI

HI

ANSWER ↓

ANSWER ↓

$   

$   

3-4A. LO 2, 3 See Example 3-1 on page 3-11 Ken Gorman is a maitre d’ at Carmel Dinner Club. On February 1, 20-- his gross pay was $800 (three days working, one paid vacation day, and one paid sick day). He also reported to his employer tips of $900 for the previous month (applicable taxes to be deducted out of this pay). Gorman belongs to the company’s 401(k) plan and has 5% of his gross pay ($800) deducted each week (salary reduction). Carmel Dinner Club also provides a matching contribution ($40) into the plan for Gorman. This week’s pay would have a:

a.

Deduction for OASDI tax

$   

b.

Deduction for HI tax

$   

3-5A. LO 3 See Example 3-1 on page 3-11 In 20--, the annual salaries paid each of the officers of Abrew, Inc., follow. The officers are paid semimonthly on the 15th and the last day of the month. Compute the FICA taxes to be withheld from each officer’s pay on (a) November 15 and (b) December 31.

a.

November 15

Name and Title

Annual Salary

Hanks, Timothy, President Grath, John, VP Finance

OASDI Taxable Earnings

OASDI Tax

HI Taxable Earnings

HI Tax

$156,000

   

   

138,000

   

   

James, Sally, VP Sales

69,600

   

   

Kimmel, Joan, VP Mfg.

54,000

   

   

Wie, Pam, VP Personnel

51,600

   

   

Grant, Mary, VP Secretary

49,200

   

   

b.

December 31

Name and Title

Annual Salary

Hanks, Timothy, President Grath, John, VP Finance

OASDI Taxable Earnings

OASDI Tax

HI Taxable Earnings

HI Tax

$156,000

  

  

138,000

  

  

James, Sally, VP Sales

69,600

  

  

Kimmel, Joan, VP Mfg.

54,000

  

  

Wie, Pam, VP Personnel

51,600

  

  

Grant, Mary, VP Secretary

49,200

  

  

ANSWER ↓

3-6A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 Audrey Martin and Beth James are partners in the Country Gift Shop, which employs the individuals listed below. Paychecks are distributed every Friday to all employees. Based on the information given, compute the amounts listed below for a weekly payroll period.

3-7A. LO 3 See Example 3-1 on page 3-11, Example 3-2 on page 3-12 Volpe Corporation has only five employees who are all paid $850 per week. Compute the total FICA taxes that the employer would withhold from the five employees each week and the amount the company would pay as its own liability for the employer’s share of the FICA taxes on the weekly wages of the five employees:

Employees’ total OASDI

$   

Employees’ total HI

$   

Employer’s total OASDI

$   

E...