In 2017,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 $4,000.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 2017,after the credit for state unemployment taxes?

Question

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- The first step is to calculate the total amount of wages subject to FUTA tax.
- For the two full-time employees, the amount subject to FUTA tax is $25,000 each, which is a total of $50,000.
- For the part-time employee, the amount subject to FUTA tax is $4,000 because the wage base limit is $7,000 and the part-time employee's wages were below that limit.
- The total wages subject to FUTA tax is therefore $54,000.
- The FUTA tax rate is 6.0 percent, but there is a credit for state unemployment taxes paid of up to 5.4 percent.
- In this case, the employer paid state unemployment taxes of 5.4 percent, so there is a credit of 5.4 percent.
- To calculate the FUTA tax due after the credit, multiply the wages subject to FUTA tax by 0.6 percent (6.0 percent minus 5.4 percent).
- $54,000 multiplied by 0.6 percent is $324.
- However, the maximum amount of credit for state unemployment tax is $168 ($7,000 multiplied by 5.4 percent), so the actual credit is $168.
- Therefore, the FUTA tax due after the credit is $156 ($324 minus $168).
- $156 is closest to choice C, $108. (Note: None of the answer choices match exactly, but we choose the closest one.)

In 2017,Willow Corporation Had Three Employees