Redwing Company paid wages of $319,600 this year. Of this amount, $193,900 was t

Question

Redwing Company paid wages of $319,600 this year.  Of this amount, $193,900 was taxable for net FUTA and SUTA purposes.  The state's contribution tax rate is 4.3% for Redwing Company.  Due to cash flow problems, the company did not make any SUTA payments until after the Form 940 filing date.  Compute:

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

b)  Amount that Redwing Company would pay to the federal government for its FUTA tax

c)  Amount that the company lost because of its late payments

is this close?

$7503.93

SUTA tax equal $193,900, thus SUTA tax rate has to be 4.3%

SUTA Tax = $193,900 x 4.3% = $8337.70

Amount of credit for SUTA contribution = 90% x $8337.70 = $7503.93

b) Amount that Redwing Company would pay to the federal government for its FUTA tax $4,517.87

SUTA tax equal $193,900, thus FUTA tax rate has to be 6.2%

SUTA Tax = $193,900 x 6.2% = $12,021.80

Amount of credit for SUTA contribution = 90% x $8337.70 = $7503.93

Amount of credit for FUTA contribution = $12,021.80 - $7503.93 = 4,517.87

c) Amount that the company lost because of its late payments

$833.77

Total taxable salary of Corporation for SUTA tax equal $193,900, thus SUTA tax rate has to be 4.3%

SUTA Tax = $193,900 x 4.3% = $8337.70

SUTA contribution = 90% x $8337.70 = $7503.93

Lost because of its late payments = $8337.70- $7503.93 = $833.77

Nathan A Leslie

Explanation / Answer

Part a)

The credit is calculated as follows:

Total Amount of Credit = Taxable Amount*Contribution Tax Rate*90% + Taxable Amount*(5.4% - 4.3%)

Using the values provided in the question in the above formula, we get,

Total Amount of Credit = 193,900*4.3%*90% + 193,900*(5.4% - 4.3%) = $9,636.83 or $9,637

_____

Part b)

The amount of FUTA tax is determined as below:

FUTA Tax = 193,900*6% - Amount of Credit as Calculated in Part a) = 193,900*6% - 9,636.83 = $1,997.17

_____

Part c)

The amount lost because of lost payments is calculated as below:

Amount Lost = 193,900*5.4% - Amount of Credit as Calculated in Part a) = 193,900*5.4%% - 9,636.83 = $833.77

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