PRAU5A1P1

Unit 5 [122: Payroll Accounting]

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Script

Greetings Class! Welcome to the tutorial assistance video on Problem 4-5B. I am hoping that if you compute the Net Pay for Ken Gold this will jump start you on your assignments this week. Here you go! It appears that Ken Gold has total earnings of $2,080. You will start by computing FICA taxes for Mr. Gold. But first, you need to determine if all of Mr. Gold’s wages are taxable according to the OASDI wage earning cap. For 2013 that cap is set to $113,700. You know that you are figuring earnings for the 51st week of the year which means that 50 weeks have already been considered. If you multiple 50 * 2080 (Mr. Gold’s weekly earnings) you get $104,000. This means that there is still $9,700 of his earnings that remain taxable according to FICA – OASDI. His earnings of 2080 fit within this range so you are good to continue.

Now, to compute OASDI remember you utilize 6.2% (.062) and multiple that by $2080.00 to arrive at the $87.36, which you will put in the chart. For HI taxes , you will use 1.45% times the total earnings amount of $2080 to arrive at $30.16 again, lets enter that here in the chart. You must now move on to our Federal Income Taxes. Remember there are two ways to compute this, the wage bracket method and the percentage method. You will use the percentage method here. You will start with our weekly wages of $2080.00 and subtract the number of allowances which is three in Ken Gold’s case times the amount we gather from table 4-5 in the 2014 text, which is our weekly allowance values. In this case , you will take the $75 from the table because in this situation the employees are paid weekly. You will multiple the allowance value by the number of withholding allowances claimed. So the difference between $2080 and the $225 which you got by taking the withholding allowance by the number of allowances claimed ($75*3) is $1855. You will then go ahead and look at the tax table for the percentage method of withholding which is in the back of your textbook. You will locate the appropriate payroll period (in this case weekly). In the tables, you will determine that one side is for single filers while the other is for married filers. Because Mr. Gold is married you will use the right side chart information. It is here you will plug in Ken Gold’s weekly wage amount to then find the range in which Mr. Gold’s earning fit. You determine that his earnings are within the $1,554- $2,975 which states his tax will be 191.95 plus 25% of any earnings over $1,554. In this example the earnings amount over $1,554 is $301 ($1,855 - $1,554 = $301.00). Therefore the tax for this portion is $75.25. In total Mr. Gold’s FIT will be $191.95 + 75.25 = $267.20

Follow this example of Ken Gold and it will be a sure thing that you are on your way to success!