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Horngren'S Financial And Managerial Accounting
Found in: Page 603

Short Answer

List the required employee payroll withholding deductions, and provide the tax rate for each.

Requited employee payroll withhold deduction is a required deduction imposed by the government. This includes income tax, social security tax, etc.

See the step by step solution

Step by Step Solution

Step1: Employee payroll withholding deductions

Employee payroll withheld deductions are the difference between the gross pay and net pay. From the gross pay, the employer withheld some amount and pays the rest to the employee. The withheld amount becomes the liability for the emp0loyer that is paid to a third party within the stipulated time.

There are two kinds of Employee payroll withholding deductions –

a) Required deductions: - imposed by federal or state government

b) Optional deductions: - These deductions are withheld at the employer’s request

Step 2: List of required employee payroll withheld deductions

Some of the required withheld deductions with their rates are as follow –

a) Income tax withholding –this is the deduction imposed by the federal government. Generally, this rate is around 30% in the U.S.

b) OASDI Tax – this is a kind of social security tax for old age, survivors, and disability insurance. Current this tax rate is 6.2%.

c) Medicare tax – this provides health insurance to individuals based on age or disability. At current, this rate is 1.45%.

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