Problem 6-17The Nanny Tax (LO 6.7)Sally hires a maid to work in her home for $400 per month. The maid is 25 years old and not related to Sally. During 2021, the maid worked 10 monthsfor Sally.Do not round immediate computations and round your final answers to two decimal places.a. What is the employer's share of Social Security tax Sally must pay?b. What is the employer's share of Medicare tax Sally must pay?Sally's employer's Medicare tax: $c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages?Sally should withhold for Social Security and Medicare tax of: $

Answered: Problem 6-17 The Nanny Tax (LO 6.7)…

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter8: Payroll Accounting: Employee Earnings And Deductions

Section: Chapter Questions

Problem 2MC

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Problem 6-17
The Nanny Tax (LO 6.7)
Sally hires a maid to work in her home for $400 per month. The maid is 25 years old and not related to Sally. During 2021, the maid worked 10 months
for Sally.
Do not round immediate computations and round your final answers to two decimal places.
a. What is the employer's share of Social Security tax Sally must pay?
b. What is the employer's share of Medicare tax Sally must pay?
Sally's employer's Medicare tax: $
c. What is the amount of Social Security and Medicare tax which must be withheld from the maid's wages?
Sally should withhold for Social Security and Medicare tax of: $

Expert Solution

Step 1

The current tax rate for social security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 1.45% for the employer and 1.45% for the employee, or 2.9% total.

a. Social Security Tax

Wage per month = $400

social security tax = ( wage per month x number of months worked) x tax rate

social security tax = ( 400 x 10 ) x 6.20%

social security tax =$248

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