Determine Gross and Taxable Pay Based on the information provided below, determine the gross pay for each employee. Then calculate taxable pay for federal income tax withholding, Social Security tax, and Medicare tax. 1. An employee works 37 regular hours during the first workweek of 2019 and earns $8.25/hour. He has requested that his employer withhold 8% of gross pay, which is to be contributed to a 401(k) plan. Gross pay for this employee, who did not work any overtime hours, was $305.25 (37 hours $8.25)

As 401(k) contributions are tax-deferred for the purposes of federal income tax withholding, this employee's contribution must be subtracted from gross pay in order to determine taxable pay for federal income tax withholding. The 401(k) contribution is $24.42 ($305.25 8%); therefore, taxable pay for federal income tax withholding is $280.83 ($305.25 $24.42). For this employee, there are no amounts that must be subtracted from gross pay in order to arrive at taxable pay for Social Security tax or Medicare tax (401(k) contributions are taxable for these two taxes). Therefore, taxable pay for both Social Security tax and Medicare tax is $305.25.

An employee works 43 hours (3 of which were overtime hours) during a workweek in November of 2019. The employee earns $37.50/hour, with his employer paying 1.5 times the regular rate of pay for overtime hours. To date, he has earned $132,100 during the year (these earnings include hourly wages, as well as bonus payments, which are also subject to FICA tax). He has requested that his employer withhold 10% of gross pay, which is to be contributed to a 403(b) plan.

Regular earnings for this employee were $1,500 (40 hours $37.50/hour). The overtime rate of pay is $56.25/hour ($37.50/hour 1.5), and the overtime earnings were $168.75 (3 hours $56.25/hour). Therefore, gross pay for the week was $1,668.75 ($1,500 regular earnings + $168.75 overtime earnings). Taxable earnings for federal income tax withholding must exclude the 403(b) contribution. This contribution was $166.88 ($1,668.75 gross pay 10%); therefore, the taxable earnings for federal income tax withholding were $1,501.87 ($1,668.75 gross pay - $166.88 403(b) contribution). The previous annual earnings of $132,100, when added to the gross pay of $1,668.75, total $133,768.75. As this exceeds the 2019 Social Security tax threshold of $132,900, only a portion of the gross pay is taxable for Social Security tax. The portion of gross pay that falls below the threshold totals $800 ($132,900 threshold $132,100 previous annual earnings), and therefore this $800 represents the taxable pay for Social Security tax. Medicare tax is not subject to an earnings threshold. In addition, 403(b) contributions are not exempt from Medicare tax. Therefore, taxable pay for Medicare tax is the same as the gross pay of $1,668.75

Question:

PSb 3-2 Calculate Gross Pay & Taxable Pay

For each employee, first calculate gross pay. Then determine taxable income used to calculate federal income tax withholding, Social Security tax, and Medicare tax.

NOTE:For simplicity, all calculations throughout this exercise, both intermediate and final, should be rounded to two decimal places at each calculation.

1:

An employee works 43 hours (43 - 40 were overtime hours) during a workweek in December of 2019. He earns $42/hour, with his employer paying 1.5 times the regular rate of pay for overtime hours. To date, he has earned $132,300 during the year. He has requested that his employer withhold 6.5% of gross pay, which is to be contributed to a 403(b) plan.

Taxable income for federal income tax withholding = $

Taxable income for social security tax = $

Taxable income for medicare tax = $

2:

. An employee works 35 regular hours during a workweek in August of 2019. He was hired four years ago, earns a salary of $134,700/year, and is exempt from the overtime provisions of the FLSA. To date, he has received no compensation beyond his annual salary. He has requested that his employer withhold 8.5% of gross pay, which is to be contributed to a 401(k) plan.

Taxable income for federal income tax withholding = $

Taxable income for social security tax = $

Taxable income for medicare tax = $

3:

An employee works 49 hours (49 - 40 were overtime hours) during a workweek in December of 2019. He earns $8,500/month, with his employer paying 1.5 times the regular rate of pay for overtime hours. To date, he has earned $110,100 during the year. He has requested that his employer withhold 12.5% of gross pay to contribute to a 403(b) plan.

Taxable income for federal income tax withholding = $

Taxable income for social security tax = $

Taxable income for medicare tax =