A company has a gross payroll of $120,589.36 that is taxable for federal income, social security, and medicare taxes. Federal income tax withheld is $24,117.87; combined social security and medicare taxes withheld are $9,225.09. What is the company's total payroll tax liability for this pay period?

• A. $33,342.96
• B. $42,568.05
• C. $40,156.26
• D. $66,685.92

Answer: (B)

In payroll accounting, total payroll tax liability for a pay period includes the federal income tax withheld from employees plus the employer’s share of FICA (Social Security and Medicare). The amount shown as combined Social Security and Medicare taxes withheld ($9,225.09) is the employees’ portion. The employer must match that amount, so the total FICA portion for the period is 2 × 9,225.09 = 18,450.18. Add the federal income tax withheld from employees ($24,117.87) to get the total liability: 24,117.87 + 18,450.18 = 42,568.05. Therefore, the company’s total payroll tax liability for this pay period is 42,568.05. (FUTA or other taxes aren’t provided here.)