| Note: In this chapter and in all succeeding work throughout the course, unless instructed otherwise, use the following rates, ceiling, and maximum taxes. | Employee and Employer OASDI: | 6.20% | $118,500 | $7,347 | | Employee* and Employer HI: | 1.45% | No limit | No maximum | | Self-employed OASDI: | 12.4% | $118,500 | $14,694 | | Self-employed HI: | 2.9% | No limit | No maximum | | 1. | Carry the hourly rate and the overtime rate to 3 decimal places and then round off to 2 decimal places (round the hourly rate to 2 decimal places before multiplying by one and one-half to determine the over-time rate). | | 2. | If the third decimal place is 5 or more, round to the next higher cent. | | 3. | If the third decimal place is less than 5, simply drop the third decimal place. | | | Examples: | Monthly rate $1,827 Weekly rate ($1,827 12)/52 = $421.615 rounded to $421.62 Hourly rate $421.62/40 = $10.540 rounded to $10.54 O.T. rate $10.54 1.5 = $15.81 | | Also, use the minimum hourly wage of $7.25 in solving these problems and all that follow. | | *Employee HI: Plus an additional 0.9% on wages over $200,000. Also applicable to self-employed. | Example 3-6 | Ned Fromton, an employer, files his employment tax return 20 days after the due date of the return. The amount of tax that was unpaid is $6,000. Fromtons penalty is: | | | Failure to file (5% $6,000) = $300 Note: Any fraction of a month counts as a whole month. | Example 3-7 Yeld Company failed to pay its employment taxes of $5,000 for March (due April 15) until May 20. The failure to pay penalty assessed against Yeld Company is: | Failure to Pay Tax ($5,000 0.5% 2) | = | | $50.00 | | Interest on Taxes Due ($5,000 0.03 35/365) | = | | 14.38 | | Total Penalty | = | | $64.38 | Note: In addition, a penalty for failure to make a timely deposit will also be assessed. Vulcan Company is a monthly depositor whose tax liability for March 2017 is $2,505. 1. What is the due date for the deposit of these taxes? April 17 2. Assume that no deposit was made until May 1. Compute the following penalties. Assume a 365-day year in your computations. | a. | Penalty for failure to make timely deposit. | $ | | b. | Penalty for failure to fully pay tax. | $ | | c. | Interest on taxes due and unpaid. | $ | | d. | Total penalty imposed. | $ | | | |
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