PCD Inc.operates as a Nevada business.The employees' annual earnings for the past calendar year are as follows: Annabelle $36,750,Beatrice $24,880,Michael $42,200,Howard $6,500. What is PCD Inc.'s FUTA tax liability for the year?

Question

Quizplus · Accepted Answer

FUTA tax liability is calculated as 6% of the first $7,000 of each employee's annual earnings. 
The total earnings of all employees for PCD Inc. is $110,330 ($36,750+ $24,880+ $42,200+ $6,500). 
However, only the first $7,000 of each employee's earnings is subject to FUTA tax. 
Therefore, the taxable earnings are $74,330 ($7,000 + $7,000 + $7,000 + $6,330).
The FUTA tax liability can now be calculated as 6% of the taxable earnings, which is $4,459.80. 
Rounding this to the nearest dollar, the answer is $165. Therefore, the correct answer is option D.

PCD IncOperates as a Nevada Business