Example 5-6

Yeldon Company has a $70,000 federal and state taxable payroll and has earned a reduced state tax rate of 4 percent. If none of its state tax payments are timely, the FUTA tax calculation is as follows:

Gross FUTA tax ($70,000 0.060)

$4,200

Less 90% credit for state taxes paid late ($70,000 0.04 90%)

$2,520

Less additional credit for state tax if rate were 5.4% [$70,000 (0.054 0.04)]

980

Total credit

3,500

Net FUTA tax

$700

If Yeldon Company had made its SUTA payments before the due date of Form 940, the credit for the payments (4%) and the additional credit (1.4%) would have provided a total credit of $3,780 and a FUTA tax savings of $280.

Peroni Company paid wages of $170,900 this year. Of this amount, $114,000 was taxable for net FUTA and SUTA purposes. The state's contribution tax rate is 3.1% for Peroni Company. Due to cash flow problems, the company did not make any SUTA payments until after the Form 940 filing date. Compute the following; round your answers to the nearest cent.

a.Amount of credit the company would receive against the FUTA tax for its SUTA contributions

$

b.Amount that Peroni Company would pay to the federal government for its FUTA tax

$

c.Amount that the company lost because of its late payments

$

Since the SUTA rates changes are made at the end of each year and there is much discussion about changes to the FUTA rate, the available 2017 rates were used for FUTA and SUTA.

Note: For this textbook edition the rate 0.6% was used for the FUTA tax rate for employers.

Example 5-8

1.The Iqbal Company of Georgia had a FUTA taxable payroll of $215,600 and a SUTA taxable payroll of $255,700 with a 5.6 percent SUTA tax rate. The company would pay unemployment taxes of:

FUTA $215,600 0.006

=

$1,293.60

SUTA $255,700 0.056

=

14,319.20

Total taxes

$15,612.80

2.Kresloff Company has only two employees and is located in a state that has set an unemployment tax for the company of 4.8 percent on the first $12,000 of each employee's earnings. Both employees are paid the same amount each week ($900) and have earned $11,500 up to this week's pay. The unemployment taxes that the company must pay for this week's pay would be $48.

FUTA tax (both over $7,000) = $0.00

SUTA tax ($1,000 0.048)= $48.00

($500 of each employee's pay is under the state taxable limit of $12,000)

During 2018, Jordan Company was subject to the Alaska state unemployment tax of 4.2%. The company's taxable wages for FUTA were $86,700 and for SUTA, $171,000. Compute the following; round your answers to the nearest cent.

a.SUTA tax that Jordan Company would pay to the state of Alaska

$

b.Net FUTA tax for 2018

$

c.Amount of employees' unemployment tax for 2018 (use the employee's tax rate shown inFigure 5.1.)

$

FIGURE5.1

Summary of State Unemployment Compensation Laws (2017)

Warning: The provisions of the state laws are subject to change at any time.

State

Size of Firm (One employee in specified time and/or size of payroll¹)

Contributions (On first $7,000 unless

otherwise indicated)

Benefits (Excluding

dependency allowances)

Employer Min.-Max.

Employee

Waiting Period (weeks)

Max. per Week

Min.

per Week

Max. Duration (weeks)

ALABAMA

20 weeks

0.65%-6.8% on first $8,000

none

$265

$45

26

ALASKA

any time

1.0%-5.4% on first $39,800

0.5% on first $39,800

1

370

56

26

ARIZONA

20 weeks

0.04%-10.59%**

1

240

60

26

ARKANSAS

10 days

0.4%-14.3% on first $12,000**

1

451

81

26

CALIFORNIA*

over $100 in any calendar quarter

1.5%-6.2%

0.9% on first $110,902 (disability ins)

1

450

40

25

COLORADO

any time

0.77%-10.10% on first $12,500**

1

568

25

26

CONNECTICUT

20 weeks

1.9%-6.8% on first $15,000

none

616

15

26

DELAWARE

20 weeks

0.3%-8.2% on first $18,500

none

330

20

26

DISTRICT OF COLUMBIA

any time

1.6%-7.0% on first $9,000

1

425

50

26

FLORIDA

20 weeks

0.1%-5.4%

1

275

32

23

GEORGIA

20 weeks

0.04%-8.10% on first $9,500**

none

330

44

26

HAWAII

any time

0.0%-5.6% on first $44,000

0.5% of maximum weekly wages of $1,023.31 not to exceed $5.12 per week (disability ins)

1

569

5

26

IDAHO

20 weeks or $300 in any calendar quarter

0.399%-5.4% on first $37,800

1

410

72

26

ILLINOIS

20 weeks

0.55%-7.35% on first $12,960

1

449

51

25

INDIANA

20 weeks

0.5%-7.4% on first $9,500**

1

390

50

26

IOWA

20 weeks

0.0%-8.0% on first $29,300

none

447

64

26

KANSAS

20 weeks

0.2%-7.6% on first $14,000**

1

474

117

26

KENTUCKY

20 weeks

0.6%-9.75% on first $10,200**

none

415

39

26

LOUISIANA

20 weeks

0.10%-6.2% on first $7,700**

1

247

10

26

MAINE

20 weeks

0.55%-5.46% on first $12,000**

1

410

71

26

MARYLAND

any time

0.3%-7.5% on first $8,500

none

430

25

26

MASSACHUSETTS

13 weeks

0.73%-11.13% on first $15,000**

1

742

31

30

MICHIGAN

20 weeks or $1,000 in calendar year

0.06%-10.3% on first $9,000**

none

362

81

20

MINNESOTA

20 weeks

0.2%-9.1% on first $32,000**

1

683

38

26

MISSISSIPPI

20 weeks

0.2%-5.6% on first $14,000

1

235

30

26

MISSOURI

20 weeks

0.0%-6.0% on first $13,000**

1

320

48

26

MONTANA

Over $1,000 in current or preceding year

0.13%-6.3% on first $31,400

1

487

139

28

NEBRASKA

20 weeks

0.0%-5.4% on first $9,000**

1

392

30

26

NEVADA

$225 in any quarter

0.25%-5.4% on first $29,500

none

426

16

26

NEW HAMPSHIRE

20 weeks

0.1%-7.0% on first $14,000

none

427

32

20

NEW JERSEY

$1,000 in any year

0.5%-5.8% on first $33,500**

0.765% (0.24% for disability ins; 0.525% for unempl. comp/family leave/workforce development funds) on first $33,500

1

677

73

26

NEW MEXICO

20 weeks or $450 in any quarter

0.33%-5.4% on first $24,300**

1

425

79

26

NEW YORK

$300 in any quarter

1.3%-9.1% on first $10,900**

0.5%-limit $0.60 weekly

1

430

100

26

NORTH CAROLINA

20 weeks

0.06%-5.76% on first $23,100**

1

350

46

26

NORTH DAKOTA

20 weeks

0.49%-11.43% on first $35,100**

1

633

43

26

OHIO

20 weeks

0.3%-8.8% on first $9,000**

1

435

111

26

OKLAHOMA

0.1%-5.5% on first $17,700

1

505

16

26

OREGON

20 weeks

1.2%-5.4% on first $38,400

1

590

138

26

PENNSYLVANIA

18 weeks or $225 in any quarter

2.6434%-11.2616% on first $9,750**

0.07% on total wages

1

573

35

26

PUERTO RICO

any time

2.2%-5.4%

0.3% on first $9,000 (disability ins)

1

133

7

26

RHODE ISLAND

any time

1.2%-9.80% on first $22,400**

1.2% on first $68,100 (disability ins)

1

566

43

26

SOUTH CAROLINA

any time

0.06%-5.46% on first $14,000

1

326

42

26

SOUTH DAKOTA

20 weeks

0.0%-10.03% on first $15,000**

1

345

28

26

TENNESSEE

20 weeks

0.01%-10.0% on first $8,000

1

275

30

26

TEXAS

20 weeks

0.59%-8.21% on first $9,000**

1

493

66

26

UTAH

$140 in calendar quarter in current or preceding calendar year

0.2%-7.2% on first $33,100

1

509

25

26

VERMONT

20 weeks

1.3%-8.4% on first $17,300

1

458

59

26

VIRGIN ISLANDS*

any time

1.5%-6.0% on first $23,500

1

495

33

26

VIRGINIA

20 weeks

0.13%-6.23% on first $8,000

1

378

60

26

WASHINGTON

any time

0.13%-5.72% on first $45,000**

1

681

158

26

WEST VIRGINIA

20 weeks

1.5%-8.5% on first $12,000**

1

424

24

26

WISCONSIN

20 weeks

0.0%-12.0% on first $14,000**

none

370

54

26

WYOMING

$500 in current or preceding calendar year

0.34%-8.84% on first $25,400

1

489

34

26

¹This is $1,500 in any calendar quarter in current or preceding calendar year unless otherwise specified.

*2016 FUTA credit reduction state

**Allow voluntary contributions