Calculating Payroll Taxes
For this activity, you are the sole owner of a small printing business, known as New
Bloomsbury. Over the past year, New Bloornsburys business has grown un expectedy,
especially given the rise of digital publishing, and you were forced to respond to the increase
in demand.
In response, you hired two new employees to help you complete customer orders, and today
it's time to prepare paychecks for your new employees and you. You know that a certain amount needs to be withheld from each employee's pay to cover payroll taxes for Social Security and Medicare. Calculate FICA (124%, with 6.2% paid by the employee and 6.2% paid by the employer) and MEDIFICA ( 2.9% with 1.45% paid by the employee and 1.45% paid by the employer) for your two employees and you.
Here's how much each of you were paid for the current payroll period:
Your pay: $3,050
Employee 1: $1,600
Employee 2: $1,300
since you are self employed, you must withhold the total percentage of the payroll taxes from your income ( essentially, you pay the employee and the employers contributions). Answer the following questions in full sentences:
1. how much must you withhold from your own paycheck to cover Fica and Medifica?
2. how mch must you withhold from employee 1's paycheck to cover payroll taxes for Fica and Medifica?
3. How much must you withhold from employee 2's paycheck to cover Fica and Medifica?