Answer to Question #112624 in Accounting for Everlyn

Question

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

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

An employer in a state with a credit reduction of 2.1% would compute its FUTA tax by reducing the 6.0% FUTA tax rate by a FUTA credit of only 3.3% (the standard 5.4% credit minus the 2.1% credit reduction).

$492,020 *0.0033 = $1,623.67