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Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages. Hunter...

Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages.

Hunter Company had a FUTA taxable payroll of $192,700 for the year. Since the company is located in a state that has 1.5% FUTA credit reduction due to unpaid loans, determine Hunter's FUTA tax liability for the year. Round your answer to two decimal places.
$_________

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Answer #1

The company is located in a state with a credit reduction of 1.5 %, therefore we would compute its FUTA tax by reducing the 6% FUTA tax rate by a FUTA credit of only 3.9%, Which is the standard 5.4% credit minus the 1.5 % credit reduction

This would give an effective FUTA tax rate of 2.1 % for the year

In states that are not subject to credit reduction, the effective FUTA tax rate remains 0.6%

The effective tax rate of FUTA will be 2.1 % in our case.

In states that are not subject to credit reduction, the effective FUTA tax rate remains 0.6%

The effective tax rate of FUTA will be 2.1 % in our case.

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