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Hi guys,
The question is:
For the week ended June 30th, Free Co. paid gross wages of $20,000, from which federal income taxes of $2,500 and FICA were withheld. All wages paid were subject to FICA tax rates of 7% each for employer and employee. Free makes all payroll-related disbursements from a special payroll checking account. What amount should Free have deposited in the payroll checking account to cover net payroll and related payroll taxes for the week ended June 30th?
Solution: Gross wages: $20,000 + $ $1400 (Employer fica tax) = $21, 400 Net payroll & Employer FICA
I am confused about why the $2,500 isn’t added to the payroll expenses for the employee? It says The co. withheld income income taxes of $2,500 AND FICA. So why are FICA taxes still added back when they are withheld as an expense, but not the income taxes?
Sorry if this sounds like an obvious question, it’s just not clicking together.
Thank you!
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