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Peroni Company paid wages of $167,600 this year. Of this amount, $104,900 was taxable for net...

Peroni Company paid wages of $167,600 this year. Of this amount, $104,900 was taxable for net FUTA and SUTA purposes. The state's contribution tax rate is 3.1% for Peroni 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 Peroni 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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Answer #1

Note:

FUTA tax rate = 6%.

Credit against FUTA tax is allowable upto 5.4%.

In case of delay, credit equal to 90% of SUTA dues is allowable.

Answer a.

Credit for SUTA contributions = 90% credit for state taxes paid late + Additional tax credit if rate were 5.4%

Credit for SUTA contributions = ($104,900 * 3.1% * 90%) + $104,900 * (5.4% - 3.1%) = $2926.71 + $2,412.7 = $5339.41

Answer b.

Gross FUTA tax = $104,900 * 0.06 = $6294

Net FUTA tax payable = Gross FUTA tax - Credit for SUTA contributions = $6294 - $5339.41 = $954.59 = $955

Answer c.

In case the company had paid its states taxes on time, then it would have received full credit instead of 90%. Thus, it has lost 10% of its credit for state taxes.

Loss to the company because of late payments = $104,900 * 3.1% * 10% = $325.19 = $325

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