In 2013,Willow Corporation had three employees.Two of the employees worked full-time and earned salaries of $25,000 each.The third employee worked only part-time and earned $3,000.The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000.How much FUTA tax is due from Willow Corporation for 2013,after the credit for state unemployment taxes?

Question

Quizplus · Accepted Answer

FUTA tax is calculated at a rate of 6% on the first $7,000 of each employee's wages. Since two employees earned $25,000 each, the total wages subject to FUTA tax are $50,000 ($25,000 + $25,000). The part-time employee's wages of $3,000 are also subject to FUTA tax. Therefore, the total wages subject to FUTA tax are $53,000 ($50,000 + $3,000). The FUTA tax owed is 6% of $7,000, which is $420 per employee. The two full-time employees have wages above the $7,000 threshold, so the employer owes FUTA tax on all of their wages, for a total FUTA tax of $840 ($420 per employee x 2 employees). For the part-time employee, the employer owes FUTA tax on only the $3,000 in wages, for a total FUTA tax of $180 ($3,000 x 6%). However, the employer gets a credit for the state unemployment tax paid, which is equal to 5.4% of the first $7,000 of wages for each employee. This credit is $378 per employee ($7,000 x 5.4%), for a total credit of $1,134 ($378 per employee x 3 employees). Therefore, the net FUTA tax owed by the employer is $102 ($1,020 - $1,134). The correct answer is B.

In 2013,Willow Corporation Had Three Employees