Assume the following totals for Minihaha Tubing for the year ended December 31, 2022: $$\begin{array}{ll}
\text {employee FICA tax }&\text {\$68,000 }\
\text { federal income tax }&181,000\\text {state income taxes }&18,000\\text { employer FICA tax}&68,000\\text { federal unemployment tax}&1,000\\text {state unemployment tax}&8,000
\end{array}$$ The total tax reported on Form 940 is

Question

Quizplus · Accepted Answer

The total tax reported on Form 940 is the Federal Unemployment Tax Act (FUTA) tax, which is calculated at a rate of 6% on the first $7,000 of each employee's wages. Therefore, the maximum amount of FUTA tax payable per employee is $420 ($7,000 x 6%). If we assume Minihaha Tubing had 25 employees earning at least $7,000 each, the total FUTA tax payable would be $10,500. However, there is a credit of up to 5.4% available for employers who pay their state unemployment taxes on time, reducing the FUTA tax liability to $1,000 ($10,500 x 5.4%).

Assume the Following Totals for Minihaha Tubing for the Year