 In this presentation, we will take a look at the calculation for Medicare tax. Here we are on the payroll register. We have our two employees, Bill and Pam. We have over here the regular pay, the overtime pay, and then the total earnings. When looking at the calculation for Medicare, we're going to be looking at the earnings for Medicare, which could differ from the earnings for the total earnings. Remember, when we look at the total earnings, that's of course the regular pay and the OT pay. When we start to calculate the payroll taxes, then we may have to adjust the earnings. For example, FIT is going to be reduced possibly by things like a 401k plan or a retirement plan and a cafeteria plan. The OASDI, or Social Security, is going to have a CAP, which is the major component as well as possibly being reduced by something like a cafeteria plan. The HI, which is part of FICA, is going to be different than the OASDI, or the Medicare will differ from the OASDI. In this case, there's no CAP, so that's the major difference between the two types of wages for the FICA taxes. For the HI wage, we're going to reduce it just by the cafeteria plan. The difference then between the Medicare wages here and the total earnings up here will be the cafeteria plan. This example then, the 756.5 total earnings minus the 506.5 Medicare earnings is 250. That then would be the cafeteria plan here, like the health insurance type plan. That's going to be the major difference that could be there between total earnings and the HI or Medicare earnings. Note that that's different from the OASDI, which has this CAP, which is a major component of the OASDI or Social Security. Now we'll do the calculation. We're going to start with the total here and calculate the total for the employer and employee portions of HI or Medicare. Then we'll go back and calculate each individual component and see that they will line up the same way. First, we're going to take the total. We take the total HI, 3,935 times the rate 1.45 percent or 0.0145. We get to $56.70. If we do that again for the employer portion, HI wages times the 0.1.45 or 0.0145 gives the $56.70. Then if we add those two up, we come up with the $113.40. So this is the employer and employee portion. We can come up with those same numbers if we do this by an employee by employee basis, bill and PAM, bill and PAM respectively. So we'll take the 506.50 times the 1.545 or 0.0145 gives us the $10.97, 3,403.85 times the 1.45 percent gives us $52.98 that totals out to the $63.95. And then the same thing for the employer portion, the 506.50 times the 1.45 gives us the $10.97 again. The 3,403.85 times the 1.45 gives the $52.98, the sum of those being the $63.95. The End