Question & Answer: Late Payments…..

Late Payments

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:

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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

Expert Answer

 

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

Solution: $7503.93

Working:

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

SUTA Tax = $193,900 * 4.3% = $8337.70

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

 

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

Solution: $4,517.87

Working:

Total taxable salary of Corporation R for SUTA tax equal $193,900, thus FUTA tax rate has to be 6.2%

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

Amount of credit for SUTA contribution = 90% * $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

Solution: $833.77

Explanation:

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

SUTA Tax = $193,900 * 4.3% = $8337.70

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

Amount that the company lost because of its late payments = $8337.70- $7503.93 = $833.77

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