In 2014, Willow Corporation had three employees. Two of the employees worked full-time and earned salaries of $25,000 each. The third employee worked only part-time and earned $3,000. The employer timely paid state unemployment tax equal to 5.4 percent of each employee's wages up to $7,000. How much FUTA tax is due from Willow Corporation for 2014, after the credit for state unemployment taxes?

Question

Quizplus · Accepted Answer

To calculate FUTA tax, we need to know the taxable wages for each employee. For the two full-time employees, the taxable wages are the first $7,000 of their salaries, which is $14,000 total. For the part-time employee, the taxable wages are $3,000.

The FUTA tax rate for 2014 is 6.0%, but there is a credit of up to 5.4% for state unemployment taxes paid. Since Willow Corporation paid the full 5.4% for each employee, their credit is the maximum allowed. Therefore, the net FUTA tax rate is 0.6%.

The FUTA tax due is calculated as follows:

($14,000 + $3,000) x 0.6% = $102

So the answer is B, $102.

In 2014, Willow Corporation Had Three Employees