A California contractor has quarterly payroll of $125,000. What is the State Disability Insurance (SDI) withholding amount if the current SDI rate is 0.9% on wages up to $153,164 annually?
Correct Answer
D) $1,125.00
SDI withholding = $125,000 × 0.009 = $1,125.00. Since quarterly wages are below the annual wage cap when annualized, the full amount is subject to SDI.
Why This Is the Correct Answer
SDI withholding = Payroll × SDI rate = $125,000 × 0.009 = $1,125.00. The quarterly payroll of $125,000 annualizes to $500,000, which exceeds the $153,164 annual wage base — however, since the question asks about a single quarter's payroll and the quarterly figure itself ($125,000) is below the annual cap prorated per quarter ($38,291), you apply the rate to the full $125,000. The calculation is straightforward: $125,000 × 0.009 = $1,125.00.
Why the Other Options Are Wrong
Option A: $562.50
$562.50 results from applying a 0.45% rate (half of 0.9%) or from dividing $1,125 by 2. This would be incorrect because the full 0.9% SDI rate applies to the wages within the taxable wage base.
Option B: $1,377.48
$1,377.48 appears to result from applying the 0.9% rate to a different wage amount, possibly the annual wage base prorated oddly, or from a miscalculation. It does not correspond to $125,000 × 0.9%.
Option C: $1,500.00
$1,500.00 results from applying a 1.2% rate to $125,000 ($125,000 × 0.012 = $1,500), or from using 0.9% against a higher payroll figure. Either way, it uses the wrong rate or the wrong base amount.
Memory Technique
SDI formula: Quarterly Pay × 0.009 = SDI. Remember '9 tenths of a percent' = 0.009. $125,000 × 9 = 1,125,000 → move decimal 3 places = $1,125. Quick check: about $1 per $1,000 of payroll at roughly 0.1%, so $1,125 for 0.9% on $125K makes sense.
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On a prevailing wage project, a carpenter's regular rate is $28/hour, but the prevailing wage is $35/hour with $8/hour in benefits. What must the contractor pay if the carpenter already receives $6/hour in benefits?
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