Question

a. Complete Part 2 of Form 940 based on the following information: (Round your answers to two decimal places, if necessary.)

Total payroll for the year $913,590

Payroll to employees in excess of $7,000 $421,930

Employer contributions into employees' 401(k) plans $23,710

Part 2: Determine your FUTA tax before adjustments. If any line does NOT apply, leave it blank.

Retirement/Pension

Subtotal $445,640

Total taxable FUTA wages $467,950

FUTA tax before adjustments $2,807.70

If the employer is located in California, which has a credit reduction of 2.1%, what would be the amount of the credit reduction?

Answer 1

Employers who have employees that work for them are liable for payroll taxes each time they run their payroll. The employer is liable for unemployment taxes and half of the FICA taxes.

Total taxable FUTA wages is calculated as:

$913,950 - $421,930 = $492,020

FUTA tax before adjustments is calculated as:

$492,020 * 0.006 = $2,952.12