Answer to Question #111588 in Accounting for Everlyn

Question

Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages.

Faruga Company had FUTA taxable payrolls for the four quarters of $38,400; $29,600; $16,500; and $8,900, respectively. What was the amount of Faruga’s first required deposit of FUTA taxes?

Answer 1

$7000\times0.06=420$

When calculating FUTA taxes, it is important to understand the kinds of incomes that need to be taxed. Ideally, the unemployment tax is calculated on taxable wages that fall under the first $7,000 per employee per year, and any amounts above $7,000 are not taxed. The taxable income comprises wages and salaries, commissions, bonuses, sick pay, vacation allowances, contributions to retirement plans, etc.

Therefore, the above value must be multiplied by the number of such employees

If for example there are 10 such workers, then

$7000\times0.06\times10=4200$

However, if a state’s fully paid these loans, it can claim the max tax credit reduction of 5.4%. It means that they will only pay 0.6% FUTA tax.

 $4200*0.006=25.2$