What is fica oasdi tax

what is fica oasdi tax

Payroll Taxes Payable Liabilities for payroll taxes result from companies employing people. Employers are responsible not only for paying their employees, but also for complying with payroll tax laws. For example, one important requirement of payroll tax laws is employers must withhold income taxes from employees' pay. To better understand many issues related to payroll taxes liabilities, the following paragraphs briefly examine some major issues of payroll systems.

Payroll systems In general, payroll refers to the dollar amounts earned by employees for services they provide to companies. Payroll is often the largest expense of service businesses, such as legal firms, accounting firms, and consulting companies. Payroll is often the second largest expense of merchandising and manufacturing companies, second only to the cost of goods sold. Payroll systems accumulate data and use them to calculate the dollar amount due each employee, the amounts owed to governments and other agencies, and the company's payroll-related expenses and liabilities.

Employee earnings An employee's total earnings for a given period is called gross pay. An employee's gross pay depends upon the contract between the employee and employer. Some employees' earnings are based on the number of hours they work. Their gross pay, often called wages, is calculated by multiplying the number of hours worked by their pay rates

per hour. For example, an employee who worked 30 hours in a week at a wage rate of $8 per hour would have earned wages of $240 for the week ($30 hours x $8 per hour). Other employees' earnings are not based on the number of hours they work but, rather, on a longer period of time, such as a week or month. Their gross pay, often called salaries, is simply their salary for the period. For example, an employee whose monthly salary is $4,000 would have earned a salary of $4,000 during a month. Hourly employees usually receive 11/2 times their normal wage rates if they work in excess of a certain number of hours in a week, such as 35 or 40. Depending on the employer and employee, salary employees also may receive such overtime premiums. Since gross pay is an employee's total earnings for a period, it would include any overtime premium earned by the employee.

Practice Exercise

Scott Sullivan's employment contract requires him to work 40 hours per week at a wage rate of $12 per hour. If he works more than 40 hours in a week, his will earn 11/2 times his normal wage rate. Calculate Scott's gross pay for a week in which he works 48 hours.

Source: faculty.uml.edu

Category: Insurance

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