If an employer fails to pay state employment taxes on a timely basis, the rate on FUTA taxes will
A.remain the same
B.be lower
C.increase by 100%
D. increase
I picked D can someone check my answer.
To determine the correct answer to this question, we need to understand the relationship between state employment taxes and FUTA taxes.
FUTA stands for the Federal Unemployment Tax Act, which requires employers to pay taxes to fund unemployment benefits for workers who have lost their jobs. The amount of FUTA tax owed by an employer is calculated as a percentage of the wages paid to employees.
The rate of FUTA tax is generally 6% of the first $7,000 in wages paid to each employee. However, employers who pay their state unemployment taxes on time can receive a credit of up to 5.4% against their FUTA tax liability. This means that the effective FUTA tax rate for most employers is 0.6%.
Now, if an employer fails to pay their state employment taxes on a timely basis, they may lose access to the full 5.4% credit against their FUTA tax liability. In such cases, the FUTA tax rate could increase for that particular employer.
Therefore, the correct answer to the question is option D: increase.