Roxy Co., which has a taxable payroll of $600,000, 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 Roxy Co.?
A) $70,200
B) $49,200
C) $24,000
D) $16,800

Question

Quizplus · Accepted Answer

The total FUTA tax before credits is $600,000 * 6.2% = $37,200. However, companies can receive a credit of up to 5.4% for state unemployment taxes paid. Since Roxy Co.'s state rate is 2%, the credit would be the full 5.4%, reducing the FUTA tax to 0.8% (6.2% - 5.4%). Therefore, the FUTA tax is $600,000 * 0.8% = $4,800. The state unemployment tax is $600,000 * 2% = $12,000. The total unemployment tax is $4,800 (FUTA) + $12,000 (state) = $16,800.

Roxy Co, Which Has a Taxable Payroll of $600,000, Is Subject