Answer to Question #112622 in Accounting for Everlyn

Question

Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages.
Hunter Company had a FUTA taxable payroll of $192,700 for the year. Since the company is located in a state that has 1.5% FUTA credit reduction due to unpaid loans, determine Hunter's FUTA tax liability for the year.

Answer 1

Standard FUTA tax rate:6%

Standard loan rate on FUTA:5.4%

In connection with the fact that there are unpaid loans, then the loan rate is reduced: 5.4-1.5=3.9

Effective FUTA tax rate:6.0-3.9=2.1

Annual FUTA tax:

$192700\times0.021=4046.7$