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?

Question

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?

Answer 1

To calculate the FUTA tax paid on these employees in the first quarter of the year, we need to find the FUTA taxable wages for each employee and then multiply them by the FUTA tax rate.

First, let's find the FUTA taxable wages for each employee. The FUTA taxable wages are the earnings up to the first $7,000, so for each employee, we need to check if their earnings exceed $7,000 or not.

John Abner earns $422 per week. Since he earns less than $7,000, his FUTA taxable wages are equal to his weekly earnings, which is $422.

Anne Clark earns $510 per week. Again, her earnings are less than $7,000, so her FUTA taxable wages are $510.

Todd Corbin earns $695 per week. Since his earnings are more than $7,000, his FUTA taxable wages will be capped at $7,000. So, Todd's FUTA taxable wages are $7,000.

Now, let's calculate the FUTA tax for each employee. The FUTA tax rate is 6.2% minus the SUTA tax rate of 5.4%. Therefore, the FUTA tax rate is 6.2% - 5.4% = 0.0088.

For John Abner, the FUTA tax paid would be $422 (FUTA taxable wages) multiplied by 0.0088 (FUTA tax rate), which equals to $3.71 (rounded to the nearest cent).

For Anne Clark, the FUTA tax paid would be $510 (FUTA taxable wages) multiplied by 0.0088 (FUTA tax rate), which equals to $4.49 (rounded to the nearest cent).

For Todd Corbin, the FUTA tax paid would be $7,000 (FUTA taxable wages) multiplied by 0.0088 (FUTA tax rate), which equals to $61.60 (rounded to the nearest cent).

Finally, to find the total FUTA tax paid on these employees in the first quarter of the year, we add up the FUTA taxes for each employee:

$3.71 + $4.49 + $61.60 = $69.80 (rounded to the nearest cent).

Therefore, Universal Exporting paid a total of $69.80 in FUTA tax on these employees in the first quarter of the year.