Question

Coronado Industries, which has a taxable payroll of $1350000, is subject to FUTA tax of 6.2% that includes a state contribution rate of 5.4%. However, because of stable employment experience, the company’s state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Coronado Industries?

Answer 1

Answer:

= $37,800

Explanation:

Step 1: Bring out the important figures for the calculation

Coronado Industries taxable payroll = $1,350,000

Federal Unemployment Tax Act (FUTA) rate = 6.2%

State Unemployment Tax Acy (SUTA) rate is 5.4% of the the FUTA's 6.2%

Third very important information: SUTA has been reduced to 2%

Step 2: Apply the information before the reduction

FUTA rate = 6.2% - 5.4% = 0.8%

Meaning FUTA = 0.8% x $1,350,000= $10,800

SUTA = 5.4% x 1,350,000= 72,900

Total = $83,700

Step 3: Calculate the new total FUTA and SUTA based on reduction of SUTA to 2%

First, FUTA remains constant

= 0.8% of $1, 350,000= $10,800

Secondly, SUTA is now 2%

= 2% (0.02) x $1,350,000= $27,000

Total amount of FUTA and SUTA for Coronado Industries

= $10,800 + $27,000

= $37,800