Goshen works part-time for PCN, Inc. and earned $6,400. He also works part-time for QDO Inc., and earned $7,300 for 2015. How much FUTA tax are his employers required to remit to the IRS? Assume the employer receives the maximum credit for state unemployment taxes and Goshen started on September 1, 2015.

Question

Quizplus · Accepted Answer

First, we need to determine the taxable wages for each employer. The FUTA tax only applies to the first $7,000 of wages earned by an employee. Since Goshen started working for PCN, Inc. on September 1, 2015, he earned $6,400/4 months = $1,600 per month for a total of $4,800 which is below the taxable limit of $7,000. Therefore, PCN, Inc. is not required to pay FUTA tax for Goshen.

For QDO Inc., Goshen earned $7,300 which exceeds the FUTA taxable limit of $7,000. Therefore, QDO Inc. is required to remit FUTA tax. The FUTA tax rate is 6.0%, but employers are allowed a credit of up to 5.4% for state unemployment taxes. Therefore, the net FUTA tax rate is 0.6% (6.0% - 5.4%).

The FUTA tax owed by QDO Inc. is calculated as follows: 
FUTA tax = (FUTA taxable wages) x (FUTA tax rate)
FUTA tax = ($7,000) x (0.6%) 
FUTA tax = $42.00

Therefore, the total FUTA tax required to be remitted by Goshen's employers is $42.00 for QDO Inc. only.

Goshen Works Part-Time for PCN, Inc