Palco Co., which has a taxable payroll of $900,000, is subject to FUTA tax of 6.2% and a state contribution rate of 5.4%. However, because of stable employment experience, the company's state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Palco Co.?

Question

Quizplus · Accepted Answer

The total amount of federal and state unemployment tax for Palco Co. can be calculated as follows: For FUTA, the company is eligible for a credit of up to 5.4% against the 6.2% FUTA tax rate if it pays state unemployment taxes on time. This means the effective FUTA tax rate is 0.8% (6.2% - 5.4%). The FUTA tax is then 0.8% of $900,000, which equals $7,200. The state unemployment tax is 2% of $900,000, which equals $18,000. Therefore, the total unemployment tax is $7,200 (FUTA) + $18,000 (state) = $25,200.

Palco Co, Which Has a Taxable Payroll of $900,000, Is Subject