Question

Lopez Company paid wages of $178,200 this year. Of this amount, $107,500 was taxable for net FUTA and SUTA purposes. The state's contribution tax rate is 3.1% for lopez Company. Due to cash flow problems, the company did not make any SUTA payments until after the Form 940 filing date. Compute the following; round your answers to the nearest cent.

a. Amount of credit the company would receive against the FUTA tax for its SUTA contributions
$

b. Amount that lopez Company would pay to the federal government for its FUTA tax
$

c. Amount that the company lost because of its late payments
$

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During 2017, lopez worked for two different employers. Until May, he worked for M Construction Company in, Iowa, and earned $21,210. The state unemployment rate for lopez is 4.6%. He then changed jobs and worked for Hugh Improvement Company in kansas, and earned $28,200 for the rest of the year. The state unemployment rate for Ford is 5.1%. Determine the unemployment taxes (FUTA and SUTA) that would be paid by each company. Round your answers to the nearest cent.

Use Figure 5.1 to determine SUTA caps in Iowa and Kansas

A lopez Construction Company	$
b. Hugh Improvement Company	$

GURE 5.1 Summary of State Unemployment Compensation Laws (2016) Warning: The provisions of the state laws are subject to change at any time. State Size of Firm (One employee in specified time and/or size of payroll1) Contributions (On first $7,000 unless otherwise indicated) Benefits (Excluding dependency allowances) Employer Min.–Max. Employee Waiting Period (weeks) Max. per Week Min. per Week Max. Duration (weeks) ALABAMA 20 weeks 0.65%–6.8% on first $8,000 none $265 $45 26 ALASKA any time 1.0%–5.4% on first $39,700 0.5% on first $39,700 1 370 56 26 ARIZONA 20 weeks 0.03%–7.79%** 1 240 60 26 ARKANSAS 10 days 0.5%–14.4% on first $12,000** 1 451 81 26 CALIFORNIA* over $100 in any calendar quarter 1.5%–6.2% 0.9% on first $106,742 (disability ins) 1 450 40 25 COLORADO any time 0.77%–10.14% on first $12,200 1 552 25 26 CONNECTICUT* 20 weeks 1.9%–6.8% on first $15,000 none 598 15 26 DELAWARE 20 weeks 0.3%–8.2% on first $18,500 none 330 20 26 DISTRICT OF COLUMBIA any time 1.6%–7.0% on first $9,000 1 359 50 26 FLORIDA 20 weeks 0.1%–5.4% 1 275 32 23 GEORGIA 20 weeks 0.04%–8.10% on first $9,500** none 330 44 26 HAWAII any time 0.2%–5.8% on first $42,200 0.5% of maximum weekly wages of $982.36, not to exceed $4.91 per week (disability ins) 1 551 5 26 IDAHO 20 weeks or $300 in any calendar quarter 0.425%–5.4% on first $37,200 1 398 72 26 ILLINOIS 20 weeks 0.55%–7.75% on first $12,960 1 426 51 25 INDIANA 20 weeks 0.505%–7.474% on first $9,500** 1 390 50 26 IOWA 20 weeks 0.0%–8.0% on first $28,300 none 431 64 26 KANSAS 20 weeks 0.2%–7.6% on first $14,000** 1 469 117 26 KENTUCKY 20 weeks 1.0%–10.0% on first $10,200** none 415 39 26 LOUISIANA 20 weeks 0.10%–6.2% on first $7,700** 1 247 10 26 MAINE 20 weeks 0.63%–5.46% on first $12,000** 1 386 67 26 MARYLAND any time 0.3%–7.5% on first $8,500 none 430 25 26 MASSACHUSETTS 13 weeks 0.73%–11.13% on first $15,000** 1 722 31 30 MICHIGAN 20 weeks or $1,000 in calendar year 0.06%–10.3% on first $9,000** none 362 81 20 MINNESOTA 20 weeks 0.2%–9.1% on first $31,000** 1 658 38 26 MISSISSIPPI 20 weeks 0.36%–5.56% on first $14,000 1 235 30 26 MISSOURI 20 weeks 0.0%–7.8% on first $13,000** 1 320 48 26 MONTANA Over $1,000 in current or preceding year 0.0%–6.12% on first $30,500 1 471 134 28 NEBRASKA 20 weeks 0.0%–5.4% on first $9,000** 1 362 30 26 NEVADA $225 in any quarter 0.25%–5.4% on first $28,200 none 407 16 26 NEW HAMPSHIRE 20 weeks 0.1%–7.0% on first $14,000 none 427 32 20 NEW JERSEY $1,000 in any year 1.2%–7.0% on first $32,600** 0.705% (0.2% for disability ins; 0.505% for unempl. Comp/family leave/workforce development funds) on first $32,600 1 657 73 26 NEW MEXICO 20 weeks or $450 in any quarter 0.33%–5.4% on first $24,100** 1 423 79 26 NEW YORK $300 in any quarter 2.1%–9.9% on first $10,700** 0.5%–limit $0.60 weekly 1 420 100 26 NORTH CAROLINA 20 weeks 0.06%–5.76% on first $22,300** 1 350 46 26 NORTH DAKOTA 20 weeks 0.28%–10.72% on first $37,200** 1 633 43 26 OHIO* 20 weeks 0.3%–8.7% on first $9,000** 1 424 111 26 OKLAHOMA 0.1%–5.5% on first $17,500 1 505 16 26 OREGON 20 weeks 1.2%–5.4% on first $36,900 1 538 126 26 PENNSYLVANIA 18 weeks or $225 in any quarter 2.801%–10.8937% on first $9,500** 0.07% on total wages 1 573 35 26 PUERTO RICO any time 2.4%–5.4% 0.3% on first $9,000 (disability ins) 1 133 7 26 RHODE ISLAND any time 1.69%–9.79% on first $22,000** 1.2% on first $66,300 (disability ins) 1 566 43 26 SOUTH CAROLINA any time 0.06%–5.46% on first $14,000 1 326 42 26 SOUTH DAKOTA 20 weeks 0.0%–10.03% on first $15,000** 1 345 28 26 TENNESSEE 20 weeks 0.01%–10.0% on first $8,000 1 275 30 26 TEXAS 20 weeks 0.45%–7.47% on first $9,000** 1 454 63 26 UTAH $140 in calendar quarter in current or preceding calendar year 0.2%–7.2% on first $32,200 1 496 25 26 VERMONT 20 weeks 1.3%–8.4% on first $16,800 1 425 59 26 VIRGIN ISLANDS* any time 1.5%–6.0% on first $23,000 1 495 33 26 VIRGINIA 20 weeks 0.17%–6.27% on first $8,000 1 378 60 26 WASHINGTON any time 0.17%–5.84% on first $44,000** 1 664 158 26 WEST VIRGINIA 20 weeks 1.5%–8.5% on first $12,000** 1 424 24 26 WISCONSIN 20 weeks 0.05%–12.0% on first $14,000** none 370 54 26 WYOMING $500 in current or preceding calendar year 0.27%–8.77% on first $25,500 1 471 34 26

1This is $1,500 in any calendar quarter in current or preceding calendar year unless otherwise specified. *2015 FUTA credit reduction state **Allow voluntary contributions

Answer 1

Important points to note:

1) The FUTA tax rate applies to the first 7,000 of wages paid to each employee, the rate being 6%.

2) Credit against FUTA tax is allowable upto 5.4%.

3) If the SUTA dues are paid on time, SUTA contributions deductions will be allowed.

4) In case of any delay, credit equalling to 90% of SUTA dues is allowable.

5) The due date for filing Form 940 is on 31st January. However, if all FUTA dues are deposited, there is an extension upto February 10th.

6) In case of any delay in payments, the following charges will be incurred -

(A) Penalty of 10% of quarterly premium amount

(B) 1% interest on the premium amount due for each month which remains outstanding

(C) And, in case of deliberate fraud, a penalty upto 50% of outstanding payment.

Keeping this in mind, we can move forward:

a. Given, State's contribution tax rate( i.e., SUTA) = 3.1% & Taxable wages = 101,100

SUTA contributions = 3.1% of 101,100 = 3,134 (rounded)

However, since there was a delay in SUTA payments, only 90% of SUTA contributions would be allowed as credit against FUTA tax = 90% of 3,134 = 2,821 (rounded).

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b. Total taxable wages (i) = 101,100

FUTA tax rate (ii) = 6%

Amount of Gross FUTA Tax [(iii) = (i) * (ii)] = 6,066

Credit against FUTA tax (iv) = 5.4%

Amount of credit [(v) = (i) * (iv)] = 5,459 (rounded)

Amount of FUTA tax [(vi) = (iii) - (v)] = 607

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c. Since Peroni company makes SUTA payments after January 31st, the company incurs 10% penalty alongwith 1% interest of SUTA dues [Refer Point 6 (A) & 6(B)]

= (10% of 3,134) + (1% of 3,134)

= 313 + 31 = 344

Also, 10% of SUTA dues will not be allowed as credit due to delay, i.e., 313.

Total loss to company = 344 + 313 = 657.