Universal Exporting has three warehouse employees: John Abner earns $422 per week, Anne Clark earns $510 per week, and Todd Corbin earns $695 per week. The company’s SUTA tax rate is 5.4%, and the FUTA rate is 6.2% minus the SUTA. As usual, these taxes are paid on the first $7,000 of each employee’s earnings. How much FUTA tax did the company pay on these employees in the first quarter of the year?
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To calculate the FUTA tax paid by Universal Exporting on its employees in the first quarter of the year, you'll need to follow these steps:
Step 1: Determine the taxable wages for each employee.
- The taxable wages for each employee are the earnings up to $7,000. Since all three employees earn more than $7,000, the taxable wages for each employee will be $7,000.
Step 2: Calculate the FUTA tax rate.
- The FUTA rate is 6.2% minus the SUTA rate, which in this case is 5.4%.
- Calculate the FUTA rate as follows: 6.2% - 5.4% = 0.8%.
Step 3: Calculate the FUTA tax for each employee.
- Multiply the taxable wages for each employee by the FUTA rate.
- For John Abner: $7,000 * 0.008 = $56
- For Anne Clark: $7,000 * 0.008 = $56
- For Todd Corbin: $7,000 * 0.008 = $56
Step 4: Calculate the total FUTA tax paid by the company.
- Add up the FUTA taxes paid for each employee.
- Total FUTA tax paid = $56 + $56 + $56 = $168
Therefore, Universal Exporting paid a total of $168 in FUTA tax for its employees in the first quarter of the year.