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?
312.00
To calculate the FUTA tax paid on the employees, we need to follow these steps:
1. Determine the FUTA tax rate: The FUTA rate is 6.2% minus the SUTA rate. Given that the SUTA tax rate is 5.4%, we can calculate the FUTA tax rate as follows:
FUTA tax rate = 6.2% - 5.4%
= 0.8%
2. Determine the taxable earnings for each employee: The FUTA tax is paid on the first $7,000 of each employee's earnings. Therefore, we need to find the total earnings for each employee that fall within this limit.
For John Abner, his earnings are $422 per week, so in the first quarter (assuming 13 weeks), his total earnings are:
Total earnings for John = $422 * 13
= $5,486
Since his total earnings are less than $7,000, the taxable earnings for John will be $5,486.
Similarly, for Anne Clark:
Total earnings for Anne = $510 * 13
= $6,630
Since her total earnings are less than $7,000, the taxable earnings for Anne will be $6,630.
And for Todd Corbin:
Total earnings for Todd = $695 * 13
= $9,035
Since his total earnings exceed $7,000, the taxable earnings for Todd will be $7,000.
3. Calculate the FUTA tax paid for each employee: The FUTA tax is applied to the taxable earnings for each employee using the FUTA tax rate.
For John Abner:
FUTA tax for John = Taxable earnings * FUTA tax rate
= $5,486 * 0.008
= $43.89 (rounded to the nearest cent)
For Anne Clark:
FUTA tax for Anne = Taxable earnings * FUTA tax rate
= $6,630 * 0.008
= $53.04 (rounded to the nearest cent)
For Todd Corbin:
FUTA tax for Todd = Taxable earnings * FUTA tax rate
= $7,000 * 0.008
= $56 (no rounding needed)
4. Calculate the total FUTA tax paid: Add up the FUTA tax paid for each employee.
Total FUTA tax paid = FUTA tax for John + FUTA tax for Anne + FUTA tax for Todd
= $43.89 + $53.04 + $56
= $152.93 (rounded to the nearest cent)
Therefore, Universal Exporting paid a total of $152.93 in FUTA tax for the first quarter of the year.