Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first \(118,500 paid to its

employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and

SUTA taxes are 2.9% of the first \)7,000 paid to its employee. 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 amounts to cents.)

Gross Pay through August Gross Pay for September

a. \( 6,400 \) 800

b. 18,200 2,100

c. 112,200 8,000

Short answer

The amount of social security tax in the first situation is $49.6

Step-by-step solution

Definition of social security tax

The government collects social security tax to pay the people when they retire.

Calculation of taxes

Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA- Social Security	$800	6.20%	$49.60
FICA- Medicare	$800	1.45%	$11.60
FUTA [$7,000-$6,400]	$600	0.60%	$3.60
SUTA	$600	2.90%	$17.40

Calculation of taxes

Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA- Social Security	$2,100	6.20%	$130.20
FICA- Medicare	$2,100	1.45%	$30.45
FUTA		0.60%
SUTA		2.90%

Calculation of taxes

Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA- Social Security [$118,500-$112,200]	$6,300	6.20%	$390.6
FICA- Medicare	$8,000	1.45%	$116
FUTA		0.60%
SUTA		2.90%