Question
As of June 30, 2021 (the computation date for the 2022 tax rate), Sanchez Company had a negative balance of $1,190 in its unemployment reserve
As of June 30, 2021 (the computation date for the 2022 tax rate), Sanchez Company had a negative balance of $1,190 in its unemployment reserve account in State A. The company's average payroll over the last three 12-month periods amounted to $500,000. The unemployment compensation law of State A provides that the tax rate of an employer who has a negative balance on the computation date shall be 7.2% during the following calendar year.
Using the tax rate schedule presented below, compute the following:
Reserve Ratio | Contribution Rate |
0.0% or more, but less than 1.0% | 6.7% |
1.0% or more, but less than 1.2% | 6.4% |
1.2% or more, but less than 1.4% | 6.1% |
1.4% or more, but less than 1.6% | 5.8% |
1.6% or more, but less than 1.8% | 5.5% |
1.8% or more, but less than 2.0% | 5.2% |
2.0% or more, but less than 2.2% | 4.9% |
2.2% or more, but less than 2.4% | 4.6% |
2.4% or more, but less than 2.6% | 4.3% |
2.6% or more, but less than 2.8% | 4.0% |
2.8% or more, but less than 3.0% | 3.7% |
3.0% or more, but less than 3.2% | 3.4% |
3.2% or more | 3.1% |
a. The smallest voluntary contribution that Sanchez Company should make in order to effect a change in its tax rate. $fill in the blank 1
b. The amount of the tax savings as a result of the voluntary contribution if Sanchez Company's taxable payroll for 2022 is $640,000. $fill in the blank 2
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