FPC Chapter 2.5
Which of the following federal taxes, if any, must an employer withhold from an employee's tips
when the amount reported is in excess of $20.00 in the month?
A. Federal income tax only
B. Social security and Medicare taxes only
C. No taxes are required to be withheld
D. Federal income, social security, and Medicare taxes - ANS-D. Federal income, social
security, and Medicare taxes
***If an employee receives and reports $20.00 or more in tips in a calendar month, employers
must withhold federal income, social security, and Medicare taxes on the tips.***
An employee receives a $1,600.00 net bonus at year-end. When receiving the bonus, the
employee's year-to-date taxable compensation is $125,500.00. There is no state or local tax
withholding. Using the Optional Flat Rate Method, calculate the taxable income of the bonus. -
ANS-$2175.39
Flat Rate = 25%
SS Rate = 0% - total YTD wages > $118,500.00
Medicare Rate = 1.45%
25% + 1.45% = 26.45% - Rates Added
100% - 26.45% = 73.55% - Rate from 100
$1600..55% = 27.75390 => $2175.39
An employee earns $1,200.00 biweekly and receives no other compensation. Calculate the
social security and Medicare taxes withheld from the employee's biweekly paycheck. -
ANS-$91.80
6.2% + 1.45% = 7.65% - SS & MED tax rate Added
$1200.00 * 0.765 = $91.80
In April, an employee with total YTD wages of $54,000.00 received a net bonus in the amount of
$710.00. The employee works in a state with no state or local income tax withholding. Using the
Optional Flat Rate Method, calculate the gross amount of the employee's bonus. -
ANS-$1054.19
Flat Rate = 25%
, SS Rate = 6.2%
Medicare Rate = 1.45%
25% + 6.2% + 1.45% = 32.65% - Rates Added
100% - 32.65% = 67.35%
$710..35% = 10.54194 => $1054.19
A tipped employee is paid $2.68 per hour and receives $217.88 per week in tips. The employee
worked 24 hours last week. How much of the tipped employee's compensation is subject to
federal income, social security, and Medicare tax withholding? - ANS-$282.20
$2.68 * 24 = $64.32 - Wages for hours worked
$217.88 + $64.32 = $282.20 - Total Wages
When using the Optional Flat Rate Method, by what percentage is a bonus divided when
grossing up for employees with YTD wages less than $118,500.00 with no state or local
withholding taxes? - ANS-67.35%
Flat Rate = 25%
SS Rate = 6.2%
Medicare Rate = 1.45%
25% + 6.2% + 1.45% = 32.65% - Rates Added
100% - 32.65% = 67.35%
A company uses the Optional Flat Rate Method and has employees working in a state with no
state or local income taxes. When grossing-up bonuses for employees who have already
earned more than $118,500.00 but less than $200,000.00 in wages in the year, payroll should
divide the amount of the bonus by what percentage? - ANS-Flat Rate = 25%
SS Rate = 0% - total YTD wages > $118,500.00
Medicare Rate = 1.45%
25% + 1.45% = 26.45% - Rates Added
100% - 26.45% = 73.55% - Rate from 100
What is the employer's Medicare tax rate when the employee has year-to-date Medicare wages
in excess of $200,000?
A. 0.9%
B. 1.45%
C. 2.35%
D. 2.9% - ANS-C. 2.35%
Which of the following federal taxes, if any, must an employer withhold from an employee's tips
when the amount reported is in excess of $20.00 in the month?
A. Federal income tax only
B. Social security and Medicare taxes only
C. No taxes are required to be withheld
D. Federal income, social security, and Medicare taxes - ANS-D. Federal income, social
security, and Medicare taxes
***If an employee receives and reports $20.00 or more in tips in a calendar month, employers
must withhold federal income, social security, and Medicare taxes on the tips.***
An employee receives a $1,600.00 net bonus at year-end. When receiving the bonus, the
employee's year-to-date taxable compensation is $125,500.00. There is no state or local tax
withholding. Using the Optional Flat Rate Method, calculate the taxable income of the bonus. -
ANS-$2175.39
Flat Rate = 25%
SS Rate = 0% - total YTD wages > $118,500.00
Medicare Rate = 1.45%
25% + 1.45% = 26.45% - Rates Added
100% - 26.45% = 73.55% - Rate from 100
$1600..55% = 27.75390 => $2175.39
An employee earns $1,200.00 biweekly and receives no other compensation. Calculate the
social security and Medicare taxes withheld from the employee's biweekly paycheck. -
ANS-$91.80
6.2% + 1.45% = 7.65% - SS & MED tax rate Added
$1200.00 * 0.765 = $91.80
In April, an employee with total YTD wages of $54,000.00 received a net bonus in the amount of
$710.00. The employee works in a state with no state or local income tax withholding. Using the
Optional Flat Rate Method, calculate the gross amount of the employee's bonus. -
ANS-$1054.19
Flat Rate = 25%
, SS Rate = 6.2%
Medicare Rate = 1.45%
25% + 6.2% + 1.45% = 32.65% - Rates Added
100% - 32.65% = 67.35%
$710..35% = 10.54194 => $1054.19
A tipped employee is paid $2.68 per hour and receives $217.88 per week in tips. The employee
worked 24 hours last week. How much of the tipped employee's compensation is subject to
federal income, social security, and Medicare tax withholding? - ANS-$282.20
$2.68 * 24 = $64.32 - Wages for hours worked
$217.88 + $64.32 = $282.20 - Total Wages
When using the Optional Flat Rate Method, by what percentage is a bonus divided when
grossing up for employees with YTD wages less than $118,500.00 with no state or local
withholding taxes? - ANS-67.35%
Flat Rate = 25%
SS Rate = 6.2%
Medicare Rate = 1.45%
25% + 6.2% + 1.45% = 32.65% - Rates Added
100% - 32.65% = 67.35%
A company uses the Optional Flat Rate Method and has employees working in a state with no
state or local income taxes. When grossing-up bonuses for employees who have already
earned more than $118,500.00 but less than $200,000.00 in wages in the year, payroll should
divide the amount of the bonus by what percentage? - ANS-Flat Rate = 25%
SS Rate = 0% - total YTD wages > $118,500.00
Medicare Rate = 1.45%
25% + 1.45% = 26.45% - Rates Added
100% - 26.45% = 73.55% - Rate from 100
What is the employer's Medicare tax rate when the employee has year-to-date Medicare wages
in excess of $200,000?
A. 0.9%
B. 1.45%
C. 2.35%
D. 2.9% - ANS-C. 2.35%
