BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 paid to its employees, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employee.

Gross Pay through August 31 Gross Pay for September

A $5,100 $2,200

B 2,300 2,400

C 122,700 8,600

Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations A, B, and C. (Round your answers to 2 decimal places. Leave no cells blank.)

A. BMX tax in situation A = $282.3

B. BMX tax in situation B = $327.6

C. BMX tax in situation C = $1600.4

Explanation:

Given

FICA Social Security = 6.2% of the first $128,400

FICA Medicare = 1.45% of gross pay.

FUTA =0.6%

SUTA = 5.4% of the first $7,000 paid

Gross Pay through August 31 Gross Pay for September

A ---> $5,100 ---> $2,200

B> 2,300 >2,400

C.> 122,700 > 8,600

For situation A.

FICA is calculated by multiplying the tax rate by the corresponding amount

FICA social security tax : $2,200 * .062 = $136.4

FICA medicare:

$2,200 * .0145 = $31.90

FUTA and SUTA are calculated by multiplying the excess amount by respective tax rate.

FUTA taxes:

($7,000 - $5,100) * .006 = $11.40

SUTA taxes:

($7,000 - $5,100) * .054 = $102.60

BMX tax in situation A = $136.4 + $31.90 + $11.40 + $102.60

BMX Tax = $282.3

Situation B

The gross pay is multiplied by respective tax rate in this situation because the employee has not reached $7,000 in wages

FICA social security tax:

$2,400 * .062 = $148.8

FICA medicare:

$2,400 * .0145 = $34.80

FUTA taxes:

$2,400 * .006 = $14.40

SUTA taxes:

$2,400 * .054 = $129.6

BMX tax in situation B = $148.8 + $34.80 + $14.40 + $129.6

BMX Tax = $327.6

Situation C

Because the maximum amount of wages subject to social security tax is $128,400, FICA social security tax is calculated by:

($128,400 - $122,700) * .062 = $353.40

FICA medicare:

$8,600 * .0145 = $1247.00

Total taxes for BMX = $353.40 + $1247.00 = $1600.4

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