Calculate Federal Income, Social Security, and Medicare Taxes for Deceased Employee's Estate
What taxes need to be withheld from a bonus payment to a deceased employee's estate?
Given an employee died in March with YTD wages of $45,000.00 and was owed $800.00 for a bonus, what federal income, social security, and Medicare taxes must be withheld if the bonus is paid in June of the year of the employee's death?
Answer:
To calculate the federal income, social security, and Medicare taxes that must be withheld from the bonus payment to the deceased employee's estate, you need to determine the taxable income and apply the appropriate tax rates. Assuming a federal income tax rate of 15%, the federal income tax withheld would be $120.00. The Social Security tax withheld would be $49.60, and the Medicare tax withheld would be $11.60.
When an employee dies with YTD wages and a bonus owed, there are specific tax implications to consider when paying out the bonus to the deceased employee's estate. In this scenario, with YTD wages of $45,000.00 and a $800.00 bonus, we need to calculate the federal income, social security, and Medicare taxes that must be withheld from the bonus payment if it is paid in June.
First, we need to combine the YTD wages and bonus to get the total taxable income. In this case, the total taxable income would be $45,800.00 ($45,000.00 YTD wages + $800.00 bonus).
Next, based on the federal income tax rate of 15%, we calculate that the federal income tax to be withheld from the bonus payment is $120.00 ($800.00 x 15%).
For Social Security tax, the rate is 6.2%. Therefore, the Social Security tax to be withheld from the bonus payment will be $49.60 ($800.00 x 6.2%).
Similarly, the Medicare tax rate is 1.45% and the Medicare tax withheld from the bonus payment will be $11.60 ($800.00 x 1.45%).
Thus, the federal income tax withheld from the bonus payment is $120.00, the Social Security tax withheld is $49.60, and the Medicare tax withheld is $11.60. These are the taxes that must be withheld when paying out the bonus to the deceased employee's estate.