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 5-1

Parlone Company has paid wages of $4,000 to an employee in State A. During the year, the employee is transferred to State B, which has a $7,000 taxable salary limitation for its state unemployment tax. The company has a credit of $4,000 against this $7,000 limit. Thus, the company has to pay State B's unemployment tax on only the next $3,000 of wages earned by that worker in State B during the remainder of the calendar year.

In April of the current year, Steelman Press Company transferred Ken Sherm from its factory in Louisiana to its plant in Florida. The company's SUTA tax rates based on its experience ratings are 3.2% in Louisiana and 3.8% in Florida. The taxable wage limits are $7,700 in Louisiana and $7,000 in Florida. This year, Steelman Press Company paid Ken Sherm wages of $14,190; $4,950 were paid in Louisiana and the remainder in Florida. Compute the following; round your answers to the nearest cent.

a. Amount of SUTA tax the company must pay to Louisiana on Sherm's wages $

b. Amount of SUTA tax the company must pay to Florida on Sherm's wages $

c. Amount of the net FUTA tax on Sherm's wages $

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a. SUTA Taxable payroll times respective SUTA rate b. SUTA Taxable payroll times respective SUTA rate (Hint: Consider credit for wages earned in another state). c. Multiply taxable FUTA payroll times net FUTA rate; add FUTA Taxable wages (in credit reduction state) times credit reduction rate = Net FUTA tax