Timechex operates as a Nevada business.The employees' annual earnings for the past calendar year are as follows: Will,$28,440: Adalia,$35,786: Brian,$18,490;and Amanda,$6,500.
What is Timechex's FUTA tax liability for the year?

Question

Quizplus · Accepted Answer

The FUTA tax rate is 6% on the first $7,000 of each employee's earnings. Therefore, the tax liability is calculated as follows: Will ($7,000 x 0.06 = $420), Adalia ($7,000 x 0.06 = $420), Brian ($7,000 x 0.06 = $420), and Amanda ($6,500 x 0.06 = $390). However, the maximum FUTA tax credit is 5.4%, reducing the effective rate to 0.6%. Therefore, the total liability is ($7,000 x 0.006 x 3) + ($6,500 x 0.006) = $165.

Timechex Operates as a Nevada Business