QuestionCalculate Social Security, Medicare taxes, and FIT for Jordon Barrett, earning \$12,400 monthly with prior earnings of \$142,020.

Studdy Solution

STEP 1

Assumptions1. Jordon Barrett's monthly salary is \$12,400. His cumulative earnings before this payroll were \$142,0203. The Social Security tax rate is6.% on a maximum of \$142,8004. The Medicare tax rate is1.45%
5. The Federal Income Tax (FIT) is calculated using the percentage method6. All calculations are rounded to decimal places

STEP 2

First, we need to calculate the Social Security taxes. This is done by multiplying the salary by the Social Security tax rate. However, we need to make sure that the cumulative earnings including this month's salary do not exceed the Social Security maximum of \$142,800.

STEP 3

Calculate the cumulative earnings including this month's salary.
$Cumulative\, earnings = Previous\, cumulative\, earnings + Monthly\, salary$ $Cumulative\, earnings = \$142,020 + \$12,400$

STEP 4

Calculate the cumulative earnings.
$Cumulative\, earnings = \$142,020 + \$12,400 = \$154,420$

STEP 5

As the cumulative earnings exceed the Social Security maximum, we need to adjust the salary for the Social Security tax calculation. The adjusted salary is the difference between the Social Security maximum and the previous cumulative earnings.
$Adjusted\, salary = Social\, Security\, maximum - Previous\, cumulative\, earnings$ $Adjusted\, salary = \$142,800 - \$142,020$

STEP 6

Calculate the adjusted salary.
$Adjusted\, salary = \$142,800 - \$142,020 = \$780$

STEP 7

Now, we can calculate the Social Security taxes by multiplying the adjusted salary by the Social Security tax rate.
$Social\, Security\, taxes = Adjusted\, salary \\times Social\, Security\, tax\, rate$ $Social\, Security\, taxes = \$780 \\times6.2\%$

STEP 8

Convert the percentage to a decimal value.
$6.2\% =0.062$ $Social\, Security\, taxes = \$780 \\times0.062$

STEP 9

Calculate the Social Security taxes.
$Social\, Security\, taxes = \$780 \\times.062 = \$48.36$

STEP 10

Next, we need to calculate the Medicare taxes. This is done by multiplying the salary by the Medicare tax rate.
$Medicare\, taxes = Monthly\, salary \\times Medicare\, tax\, rate$ $Medicare\, taxes = \$12,400 \\times.45\%$

STEP 11

Convert the percentage to a decimal value.
$.45\% =0.0145$ $Medicare\, taxes = \$,400 \\times0.0145$

STEP 12

Calculate the Medicare taxes.
$Medicare\, taxes = \$12,400 \\times0.0145 = \$179.80$

STEP 13

To calculate the Federal Income Tax (FIT), we need to use the percentage method. This involves using tax tables, which are not provided in the problem. Therefore, we cannot calculate the FIT in this step.
Jordon Barrett's Social Security taxes are \$48.36 and his Medicare taxes are \$179.80. The FIT cannot be calculated without the tax tables.

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