Which of the following is (are) employer payroll cost(s)?
g. Federal and state unemployment tax
h. ½ of FICA taxes
i. Federal and state income taxes
j. a and b only
k. all of the above
The Correct Answer and Explanation is :
The correct answer is j. a and b only.
Explanation:
Employer payroll costs refer to the expenses a business incurs related to paying its employees. These costs are in addition to the wages or salaries paid to employees and are mandatory contributions imposed by various governmental entities, including federal, state, and local governments. Let’s break down each option:
g. Federal and state unemployment tax:
This is an employer payroll cost. Employers are required to pay federal and state unemployment taxes (FUTA and SUTA). These taxes fund unemployment benefits for workers who lose their jobs. While employees do not contribute directly to these funds, employers are solely responsible for paying them.
h. ½ of FICA taxes:
This refers to the Federal Insurance Contributions Act (FICA), which consists of Social Security and Medicare taxes. The total FICA tax rate is 15.3%, with 7.65% paid by the employee and the other 7.65% paid by the employer. The employer is responsible for matching the employee’s contribution, so the employer’s share of FICA taxes is considered a payroll cost.
i. Federal and state income taxes:
Federal and state income taxes are withheld from employees’ wages, but these taxes are not an employer payroll cost. Instead, the employer acts as an intermediary by withholding these taxes on behalf of the employee and remitting them to the government. Employers are not responsible for paying federal or state income taxes from their own funds.
Summary:
- g (unemployment taxes) and h (½ of FICA taxes) are employer payroll costs because they are directly paid by the employer.
- i (income taxes) is not an employer payroll cost because the employer only withholds the tax but does not pay it from their funds.
Thus, the correct choice is j. a and b only.