How do I figure FUTA/SUTA earnings? This is what my book gives:
James Company has three employees .Its payroll information is given below.
Employee Earnings Prior October
to October Earnings
Donald Robinson: $6050 $1200
OASDI Earnings FUTA/SUTA Earnings
$1200 $950
Tax Rate Ceiling
FICA
OASDI 6.2% $97500
Medicare 1.45% No Ceiling
FUTA 2.6% 7000
SUTA 3.6% 7000
What I do not understand is how they come up with the $950 for the FUTA/SUTA Earings. Can somebody please show me how they got that for him? I have tried for over three hours and can not figure it out.
To calculate FUTA/SUTA earnings, you need to first determine the taxable earnings of the employee for each specific tax. Let's go step by step to understand how to calculate FUTA/SUTA earnings for Donald Robinson.
1. Start by determining the taxable OASDI (Social Security) earnings for Donald Robinson. From the information provided, his earnings prior to October were $6,050, but only $1,200 is considered taxable OASDI earnings. Therefore, you will use $1,200 as taxable OASDI earnings.
2. Next, determine the FUTA (Federal Unemployment Tax Act) earnings. The FUTA tax rate is 2.6% and the wage base (or ceiling) is $7,000. Since his taxable earnings for FUTA purposes exceed the $7,000 wage base, you will use the entire $7,000 as FUTA earnings.
3. Now, calculate the SUTA (State Unemployment Tax Act) earnings. The SUTA tax rate is 3.6%, and the wage base (or ceiling) is also $7,000. Similarly, since his taxable earnings for SUTA purposes exceed $7,000, you will use the entire $7,000 as SUTA earnings.
Thus, for Donald Robinson, the FUTA/SUTA earnings would be $7,000. It's important to note that the FUTA/SUTA earnings are generally capped at the wage base or ceiling, even if the taxable earnings exceed that amount.
Overall, the $950 mentioned in your book might be a typo or an error, as the calculation for Donald Robinson's FUTA/SUTA earnings should be $7,000 based on the given information.