Questions: Solve the problem using 6.2%, up to 128,400 for Social Security tax and using 1.45%, no wage limit, for Medicare tax. Calculate the monthly Social Security and Medicare withholdings (in ) for the employee as the payroll manager for a cargo and freight company. (Round your answers to the nearest cent.) Employee Year-to-Date Earnings Current Month Social Security Medicare Andretti, K. 146,000 14,850

Solve the problem using 6.2%, up to 128,400 for Social Security tax and using 1.45%, no wage limit, for Medicare tax.
Calculate the monthly Social Security and Medicare withholdings (in ) for the employee as the payroll manager for a cargo and freight company. (Round your answers to the nearest cent.)
Employee Year-to-Date Earnings Current Month Social Security Medicare
Andretti, K. 146,000 14,850

Transcript text: Solve the problem using $6.2 \%$, up to $\$ 128,400$ for Social Security tax and using $1.45 \%$, no wage limit, for Medicare tax. Calculate the monthly Social Security and Medicare withholdings (in $\$$ ) for the employee as the payroll manager for a cargo and freight company. (Round your answers to the nearest cent.) \begin{tabular}{|l|c|c|c|c|} \hline Employee & \begin{tabular}{c} Year-to-Date \\ Earnings \end{tabular} & Current Month & Social Security & Medicare \\ \hline Andretti, K. & $\$ 146,000$ & $\$ 14,850$ & $\$ \square$ & $\square$ \\ \hline \end{tabular}

Solution

Solution Steps

To calculate the monthly Social Security and Medicare withholdings for the employee, follow these steps:

Social Security Tax Calculation:
- Determine if the current month's earnings will exceed the Social Security wage limit of $128,400.
- If the year-to-date earnings plus the current month's earnings exceed $128,400, calculate the Social Security tax only on the portion of the current month's earnings that does not exceed the limit.
- Apply the Social Security tax rate of 6.2% to the applicable earnings.
Medicare Tax Calculation:
- Apply the Medicare tax rate of 1.45% to the entire current month's earnings, as there is no wage limit for Medicare tax.

Step 1: Determine Taxable Earnings for Social Security

The Social Security tax is applied only to earnings up to the wage limit of \$128,400. Since the year-to-date earnings (\$146,000) already exceed this limit, the taxable earnings for Social Security in the current month are $0$.

Step 2: Calculate Social Security Tax

The Social Security tax rate is $6.2\%$. Since the taxable earnings for Social Security are $0$, the Social Security tax is: \[ \text{Social Security Tax} = 0 \times 0.062 = 0 \]

Step 3: Calculate Medicare Tax

The Medicare tax is applied to all earnings without a wage limit. The Medicare tax rate is $1.45\%$. Therefore, the Medicare tax for the current month's earnings of \$14,850 is: \[ \text{Medicare Tax} = 14850 \times 0.0145 = 215.325 \]