Journalizing Payroll Taxes
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The employees of Donnelly Music Company earned a total wages $4,690 during January. The total amount is taxable under FICA, FUTA, and SUTA. The state contribution rate for the company is 3.6%. The amount withheld for federal income taxes is $685. Journalize the payments of the monthly wages, and record the payroll taxes.
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Solution Summary
This solution illustrates how to compute and journalize the employer's tax liability and the employer's liability for taxes withheld from employees.
Solution Preview
Before performing the journal entries, let's get our rates clear. The gross FUTA rate is 6.4 percent, but is reduced to .8 percent for a taxpayer in a state which charges a SUTA and which is not in default on a federal loan. For 2011, the employer's social security tax rate is 6.2 percent and the employer's Medicare tax rate is 1.45 percent for a total of 7.65 percent. However, the employee's social security tax rate is 4.2 percent though the employee still pays the full 1.45 percent Medicare rate. In ...
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