Since the SUTA rates changes are made at the end of eachyear and there is much discussion about changes to the FUTA rate,the available 2018 rates were used for FUTA and SUTA.
Note: For this textbook edition the rate 0.6% was usedfor the FUTA tax rate for employers.
Example 5-5
Sutcliffe Company had taxable wages totaling $87,500 in 2019.During the year, the company paid some of its state contributionsafter the January 31, 2020, cutoff. The penalty for tardiness isshown in the following calculation of the firm's net FUTA tax for2019:
| Amount of gross FUTA tax ($87,500 × 6.0%) | | | $5,250.00 |
| State taxable wages | $87,500 | | |
| Sutcliffe's SUTA tax rate | × 5.4% | | |
| Sutcliffe's SUTA tax | $ 4,725 | | |
| Breakdown of Sutcliffe's SUTA tax payments: | | | |
| Before 1/31/20—$3,000 × 100% credit | | | (3,000.00) |
| After 1/31/20—$1,725 × 90% credit | | | (1,552.50) |
| Amount of net FUTA tax | | | $ 697.50 |
|
| If the company had made timely payments of itsstate contributions, the amount of its net FUTA tax would have beenreduced to $525, for a savings of $172.50, as follows: |
|
| Amount of gross FUTA tax ($87,500 × 6.0%) | | | $5,250.00 |
| Total taxable wages | $87,500 | | |
| Credit against tax | × 5.4% | | |
| Total credit | | | 4,725.00 |
| Amount of net FUTA tax ($87,500 × 0.6%) | | | $ 525.00 |
| $697.50 ? $525.00 = $172.50 savings | | | |
Example 5-6
Yeldon Company has a $70,000 federal and state taxable payrolland has earned a reduced state tax rate of 4 percent. If none ofits state tax payments are timely, the FUTA tax calculation is asfollows:
| Gross FUTA tax ($70,000 × 0.060) | | | $4,200 |
| Less 90% credit for state taxes paid late ($70,000 × 0.04 ×90%) | $2,520 | | |
| Less additional credit for state tax if rate were 5.4% [$70,000× (0.054 ? 0.04)] | 980 | | |
| Total credit | | | 3,500 |
| Net FUTA tax | | | $ 700 |
If Yeldon Company had made its SUTA payments before the due dateof Form 940, the credit for the payments (4%) and the additionalcredit (1.4%) would have provided a total credit of $3,780 and aFUTA tax savings of $280.
Roofling Company paid wages of $319,600 this year. Of thisamount, $193,900 was taxable for net FUTA and SUTA purposes. Thestate's contribution tax rate is 4.3% for Roofling Company. Due tocash flow problems, the company did not make any SUTA paymentsuntil after the Form 940 filing date. Compute the following;round your answers to the nearest cent.
a. Amount of credit the company would receiveagainst the FUTA tax for its SUTA contributions
$
b. Amount that Roofling Company would pay tothe federal government for its FUTA tax
$
c. Amount that the company lost because of itslate payments
$
