Payroll is one of the most testable parts of the Business and Finance exam because it is mostly arithmetic. You need the rates, the wage bases, who pays what, and the filing deadlines. The federal source is IRS Publication 15, Circular E, which is included in the Contractors Manual on the B&F reference list. Check which Circular E year your edition contains, because the exam answer depends on the year in the question.
The figures below are for 2026, from Publication 15 (2026). Wage bases change every year. Check the current Publication 15 before using these numbers for a real payroll.
Federal payroll taxes at a glance (2026)
| Tax | Employee rate | Employer rate | Wage base |
|---|---|---|---|
| Social Security | 6.2% | 6.2% | First $184,500 of wages |
| Medicare | 1.45% | 1.45% | No limit |
| Additional Medicare Tax | 0.9% on wages over $200,000 | None | Withholding starts above $200,000 |
| FUTA | None | 6.0%, generally 0.6% after the 5.4% credit | First $7,000 of wages |
| Federal income tax withholding | Per Form W-4 and Pub. 15-T | None | Not applicable |
Combined Social Security and Medicare for both sides is 15.3% (7.65% employee + 7.65% employer) on wages below the Social Security wage base.
FICA: Social Security and Medicare
FICA is matched. The employer withholds the employee's share from each paycheck and pays an equal employer share.
- Social Security stops once an employee's wages for the year reach $184,500 (2026). The maximum for 2026 is $184,500 × 6.2% = $11,439 for the employee and the same for the employer.
- Medicare has no wage base. Every dollar is taxed at 1.45% each.
- Additional Medicare Tax of 0.9% is withheld from the employee on wages over $200,000 in the calendar year. There is no employer match.
FUTA: federal unemployment tax
- Paid by the employer only. Never withheld from wages.
- Rate of 6.0% on the first $7,000 of each employee's wages for the year.
- Employers that pay state unemployment tax in full and on time can take a credit of up to 5.4%, which leaves a net rate of 0.6%.
- Maximum net FUTA per employee: $7,000 × 0.6% = $42.
- FUTA is deposited when the undeposited amount is over $500. Otherwise it carries forward to the next quarter.
States that have not repaid federal loans can be "credit reduction states," which lowers the credit. Check the Form 940 instructions for the year.
Florida reemployment tax
Florida calls its state unemployment tax the reemployment tax, under Chapter 443, Florida Statutes.
- Employer-paid. F.S. 443.131 says an employer "may not deduct contributions ... from any part of the wages of his or her employees."
- Wage base: the first $7,000 of each employee's wages in a calendar year (F.S. 443.1217).
- New employers: an employer chargeable with benefits for fewer than 8 calendar quarters pays the initial rate of 2.7% (F.S. 443.131). After that, the rate is based on the employer's own experience.
Paying the Florida tax on time is what lets the employer take the full 5.4% FUTA credit.
Filing and deposit deadlines
| Form | What it is | Due |
|---|---|---|
| Form 941 | Quarterly federal return for withheld income tax, Social Security and Medicare | Last day of the month after the quarter ends: April 30, July 31, October 31, January 31 |
| Form 940 | Annual FUTA return | January 31 of the following year |
| Form W-2 | Wage statement to each employee, and Copy A with Form W-3 to the Social Security Administration | For 2026 wages: February 1, 2027 (January 31 falls on a Sunday) |
If all of a quarter's 941 taxes were deposited on time, Form 941 may be filed by the 10th day of the second month after the quarter. Deposits themselves follow a monthly or semiweekly schedule based on the lookback period, as explained in Publication 15.
Worked payroll example (2026 rates)
A Florida contractor pays a superintendent $2,300 for one week. Year-to-date wages before this check are $90,000, so the employee is under the Social Security wage base and under $200,000. Federal income tax withholding from the W-4 is $260. This is the employer's second year, so the reemployment tax rate is still the initial 2.7%, and the employee has already passed $7,000 of wages for the year.
Step 1. Employee Social Security $2,300 × 6.2% = $142.60
Step 2. Employee Medicare $2,300 × 1.45% = $33.35
Step 3. Net pay $2,300.00 − $142.60 − $33.35 − $260.00 = $1,864.05
Step 4. Employer FICA match Social Security $142.60 + Medicare $33.35 = $175.95
Step 5. Employer FUTA and reemployment tax YTD wages are already over $7,000, so both are $0 on this check.
Step 6. Amount for the federal deposit (Form 941 taxes) Withheld income tax $260.00 + employee FICA $175.95 + employer FICA $175.95 = $611.90
Same employee, first paycheck of the year
Now suppose the same $2,300 is the first check of the year.
- FUTA: $2,300 × 0.6% = $13.80 (assuming the full credit)
- Florida reemployment tax: $2,300 × 2.7% = $62.10
- Both stop once the employee's year-to-date wages pass $7,000. For the rest of that $7,000, total FUTA would reach $42 and reemployment tax $189 ($7,000 × 2.7%).
Near the Social Security wage base
If an employee has $183,000 of 2026 wages before a $4,000 check, only $1,500 is still subject to Social Security ($184,500 − $183,000).
- Social Security: $1,500 × 6.2% = $93.00
- Medicare: $4,000 × 1.45% = $58.00 (no limit)
Common traps
- Withholding FUTA or reemployment tax from the employee. Both are employer-only.
- Applying the Social Security rate to wages above the wage base.
- Adding an employer match to the 0.9% Additional Medicare Tax.
- Using the gross FUTA rate (6.0%) when the question says the employer gets the full credit.
- Using a wage base from the wrong year. Read the year in the question.
Key numbers to tab in your book
- Social Security and Medicare rates
- Social Security wage base for the current year
- Additional Medicare Tax threshold
- FUTA rate, credit, and wage base
- Deposit schedules (monthly vs. semiweekly) and the lookback period
- Form 941, Form 940 and Form W-2 due dates
- Florida reemployment tax initial rate and wage base
Practice payroll math
Payroll questions are quick points once the rates are automatic. Our Florida Business and Finance Exam Prep includes original payroll, FICA and FUTA questions with every calculation shown and each answer cited to Circular E or the Florida statutes, with 90 days of access to practice across the whole exam. See also the Florida Business and Finance exam guide.
Practice questions
What is the employee's Medicare tax withholding on a $2,400 paycheck for an employee whose year-to-date wages are under $200,000?
- A$69.60
- B$56.40
- C$148.80
- D$34.80
Show answer
Answer: D. Employee Medicare tax is 1.45%: $2,400 x 0.0145 = $34.80. The 0.9% Additional Medicare Tax applies only to wages above $200,000, and 2.9% is the combined employer and employee rate.
Source: IRS Pub. 15 (2025), What's New
A contractor's weekly payroll is $3,000 of wages, all subject to social security and Medicare (no one is over any threshold). What is the total social security and Medicare tax, employee and employer shares combined, that it must deposit?
- A$372.00
- B$477.00
- C$459.00
- D$229.50
Show answer
Answer: C. Each side pays 6.2% + 1.45% = 7.65%. Combined is 15.3%: $3,000 x 0.153 = $459.00. $229.50 is only the employee's (or only the employer's) share.
Source: IRS Pub. 15 (2025), What's New
Gross weekly pay is $1,200. Withholdings: social security (6.2%), Medicare (1.45%), federal income tax of $95, and an after-tax union dues deduction of $40. What is net pay?
- A$881.40
- B$1,065.00
- C$973.20
- D$1,013.20
Show answer
Answer: C. Social security = $74.40; Medicare = $17.40. Net = $1,200 − $74.40 − $17.40 − $95 − $40 = $973.20. Taking out 15.3% wrongly charges the employer's matching share to the employee.
Source: IRS Pub. 15 (2025), What's New (employee rates)
Which statement about the 0.9% Additional Medicare Tax is correct?
- AEmployer and employee each pay 0.9%
- BIt is withheld from the employee only; there is no employer match
- CIt applies to all wages from the first dollar
- DIt applies only up to the Social Security wage base
Show answer
Answer: B. Pub 15 says employers withhold the 0.9% Additional Medicare Tax on wages over $200,000 and there is no employer share. It does not apply from the first dollar or stop at the SS wage base.
Source: IRS Pub 15, Additional Medicare Tax
Form 941 (Employer's Quarterly Federal Tax Return) for the first quarter is generally due by:
- AMarch 31
- BApril 15
- CJanuary 31
- DApril 30
Show answer
Answer: D. Pub 15's calendar lists quarterly Form 941 due dates of April 30, July 31, October 31, and January 31. April 15 is the individual income tax deadline.
Source: IRS Pub 15, Calendar
A Florida contractor wants to withhold part of its state reemployment tax from employees' paychecks. Is that allowed?
- AYes, up to one-half of the contribution
- BYes, if employees agree in writing
- CYes, but only for employees earning over $7,000
- DNo; the employer may not deduct reemployment tax contributions from employees' wages
Show answer
Answer: D. Section 443.131, F.S., prohibits an employer from deducting contributions, interest, penalties, fines, or fees required under ch. 443 from any part of employees' wages. Florida reemployment tax is an employer-only cost.
Source: F.S. 443.131
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