Since the SUTA rates change at the end of each year, the available $2023$ rates were used for FUTA and SUTA.

Note: For this textbook edition the rate $0\mathrm{.}6\%$ was used for the net FUTA tax rate for employers.

Example $5-11$

To illustrate the tax saving that may be realized as a result of making voluntary contributions, consider the following case of Krane Company, which is subject to the unemployment compensation law of a state that uses the reserve$-$ratio formula to determine experience ratings. The following contribution rate schedule applies for $2025$:

Reserve Ratio Rate

$0\%$ to less than $1\%6\mathrm{.}2\%$

$1\%$ to less than $1\mathrm{.}4\%5\mathrm{.}6\%$

$1\mathrm{.}4\%$ to less than $1\mathrm{.}8\%5\mathrm{.}0\%$

$1\mathrm{.}8\%$ to less than $2\mathrm{.}2\%4\mathrm{.}4\%$

$2\mathrm{.}2\%$ to less than $2\mathrm{.}6\%3\mathrm{.}8\%$

$2\mathrm{.}6\%$ to less than $3\mathrm{.}0\%3\mathrm{.}2\%$

$3\mathrm{.}0\%$ and over $2\mathrm{.}6\%$

For the three $12-$month periods ending on June $30,2024,$ the company had an average annual taxable payroll of $$330,000.$ This is the base that the state uses as the average payroll. As of June $30,2024,$ the credits to the employer$$s account exceeded the benefits paid by $$6,800.$ Thus, the $2024$ reserve ratio is $2\mathrm{.}06\%($$$6,8004$ $$330,000),$ which would result in the assignment of a $4\mathrm{.}4\%$ tax rate, as shown in the preceding table. If the employer$$s $2025$ total taxable payroll were $$390,000,$ the SUTA contribution would amount to $$17,160.$

If Krane Company makes a voluntary contribution into the state fund within the time period specified by the state law, the tax for $2025$ will be less. For example, if the company contributes $$460,$ the reserve ratio will be $2\mathrm{.}2\%($$$7,260-$: $$330,000).$ As a result, the tax rate will be reduced to $3\mathrm{.}8\%,$ with the following savings realized in $2025$:

Line Item Description Amount Amount

Tax payment with no voluntary contribution $(4\mathrm{.}4\%\backslash$times $$390,000)$ $$17,160$

Tax payment with voluntary contribution $$460$

Reserve ratio $(3\mathrm{.}8\%\backslash$times $$390,000)14,82015,280$

Tax savings $ $1,880$

As of June $30,2023($the computation date for the $2024$ tax rate$),$ Sanchez Company had a negative balance of $$1,170$ in its unemployment reserve account in State A$.$ The company's average payroll over the last three $12-$month periods amounted to $$530,000.$ 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 $7\mathrm{.}2\%$ during the following calendar year.

Using the tax rate schedule presented below, compute the following:

Reserve Ratio Contribution Rate

$0\mathrm{.}0\%$ or more, but less than $1\mathrm{.}0\%6\mathrm{.}7\%$

$1\mathrm{.}0\%$ or more, but less than $1\mathrm{.}2\%6\mathrm{.}4\%$

$1\mathrm{.}2\%$ or more, but less than $1\mathrm{.}4\%6\mathrm{.}1\%$

$1\mathrm{.}4\%$ or more, but less than $1\mathrm{.}6\%5\mathrm{.}8\%$

$1\mathrm{.}6\%$ or more, but less than $1\mathrm{.}8\%5\mathrm{.}5\%$

$1\mathrm{.}8\%$ or more, but less than $2\mathrm{.}0\%5\mathrm{.}2\%$

$2\mathrm{.}0\%$ or more, but less than $2\mathrm{.}2\%4\mathrm{.}9\%$

$2\mathrm{.}2\%$ or more, but less than $2\mathrm{.}4\%4\mathrm{.}6\%$

$2\mathrm{.}4\%$ or more, but less than $2\mathrm{.}6\%4\mathrm{.}3\%$

$2\mathrm{.}6\%$ or more, but less than $2\mathrm{.}8\%4\mathrm{.}0\%$

$2\mathrm{.}8\%$ or more, but less than $3\mathrm{.}0\%3\mathrm{.}7\%$

$3\mathrm{.}0\%$ or more, but less than $3\mathrm{.}2\%3\mathrm{.}4\%$

$3\mathrm{.}2\%$ or more $3\mathrm{.}1\%$

a$.$ The smallest voluntary contribution that Sanchez Company should make in order to effect a change in its tax rate.

fill in the blank $1$ of $1$$

b$.$ The amount of the tax savings as a result of the voluntary contribution if Sanchez Company's taxable payroll for $2024$ is fill in the blank $1$ of $1$$$630,000.$

$