Question

As of June 30, 2019 (the computation date for the 2020 tax rate), Sanchez Company had a negative balance of $1,110 in its unemployment reserve account in State A. The company's average payroll over the last three 12-month periods amounted to $540,000. The unemployment compensation law of State A provides that the tax rate of an employer who has a negative balance on the computation date shall be 7.2% during the following calendar year.

Using the tax rate schedule presented below, compute the following:

Reserve Ratio	Contribution Rate
0.0% or more, but less than 1.0%	6.7%
1.0% or more, but less than 1.2%	6.4%
1.2% or more, but less than 1.4%	6.1%
1.4% or more, but less than 1.6%	5.8%
1.6% or more, but less than 1.8%	5.5%
1.8% or more, but less than 2.0%	5.2%
2.0% or more, but less than 2.2%	4.9%
2.2% or more, but less than 2.4%	4.6%
2.4% or more, but less than 2.6%	4.3%
2.6% or more, but less than 2.8%	4.0%
2.8% or more, but less than 3.0%	3.7%
3.0% or more, but less than 3.2%	3.4%
3.2% or more	3.1%

a. The smallest voluntary contribution that Sanchez Company should make in order to effect a change in its tax rate.
$??

b. The amount of the tax savings as a result of the voluntary contribution if Sanchez Company's taxable payroll for 2020 is $650,000.
$??

Answer 1

ans a The smallest contribution he should make is $1110 (this is the negative balance amount so this needs to come at $0)
So if he makes $1110 contribution it can effect the change in tax rate	$1,110
ans b
Now tax without voluntary contribution-tax with voluntary contribution-voluntary contribution in a above= Tax saving
(650000*7.2%)-(650000*6.7%)-1110		2140	answer
If any doubt please comment