Employer FUTA-SUTA Contributions Understanding FUTA Let's assume that Rodeo Drive Jewelry Company has paid wages of $99,625 in 2018. Of this amount, a bonus of $10,000 will not be paid until January, 2019 and the wages paid in excess of the FUTA limit amounted to $64,732. The gross FUTA tax imposed is computed as follows: Description Calculation 1. Total wages paid $99,625 2. Less: Wages not paid until 2019 Less: Wages paid in excess of 2018 FUTA limit ($10,000) (64,732) (74,732) 4. Total taxable wages $24,893 5. Taxable wages Multiplied by the FUTA tax rate $24,893 x 6.0% 6. Amount of gross FUTA tax, rounded to the nearest cent. $1,493.58 Recall that an employer also makes contributions under approved state unemployment compensation laws which entities them to a FUTA maximum credit. And, even if the employer pays a SUTA rate of less than the maximum, they get the full credit against the FUTA tax. Let's look at Rodeo's credit, who is located in Darien, Connecticut: Description Calculation 1. Total taxable wages (see above) $24,893 2. Multiplied by the net rate of tax x 0.6% 3. Amount of net FUTA tax, rounded to the nearest cent. $149.36 Understanding SUTA The unemployment compensation laws of certain states set the taxable wage base at an amount higher than the federal amount paid to each employee. For example, in Connecticut, the wage base for 2018 was the first $15,000. In such states, the total contributions that the employer must pay into the state fund are computed based on their taxable wage base and not the FUTA taxable base. And, the method by which the employer contributions may be adjusted because of a favorable employment record is referred to as experience rating or merit rating. Thus, an employer's favorable experience rate (employment record) qualifies the employer for a SUTA rate lower than the FUTA rate. Let's look at the total unemployment taxes for Rodeo Company. Additional information about Rodeo is important here. They have been in business in Connecticut for over 20 years, earning an experience rating of 2.7% and reporting taxable wages on the first $15,000) of $39,625. Description Calculation 1. Net FUTA tax: $24,893 (see above) x 0.6% $149.36 2. SUTA tax: $39,625 x 2.7%, rounded 1,069.88 Total unemployment taxes, rounded to the nearest cent. $1,219.24 Activate Windows Give It A Try Compute the total unemployment taxes for each company. Note: Round all amounts to the nearest cent. Clooney Pictures is a camera store in Freeport, Maine. They paid wages of $64,884 in 2018 of which $38,167 are in excess of the FUTA limit. They have SUTA wages of $28,053 on the first $12,000 and an experience rating of 3.2%. Employer: Clooney Pictures FUTA tax $ 160.30 SUTA tax Total unemployment tax Julia's Pretty Women is a clothing store in St. Cloud, Minnesota. They paid wages of $78,160 in 2018 of which $48,850 are in excess of the FUTA limit. They have SUTA wages of $36,638 on the first $12,000 of wages and have an experience rating of 3.4%. Employer: Julia's Pretty Women FUTA tax SUTA tax Total unemployment tax Activate Windows