Question

Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages. John Gercke is an employee of The Woolson Company. During the first part of the year, he earned $6,800 while working in State A. For the remainder of the year, the company transferred him to State B where he earned $16,500. The Woolson Company's tax rate in State A is 4.2%, and in State B it is 3.15% on the first $7,000. Assuming that reciprocal arrangements exist between the two states, determine the SUTA tax that the company paid to: (Round your answers to two decimal places.)

Answer 1

State A: $285.60

State B: $6.3

Step-by-step explanation:

The computation of the SUTA tax is shown below:

For State A:

= Earned income × Company's tax rate

= $6,800 × 4.2%

= $285.60

For State B:

= Remaining income × Company's tax rate

= $200 × 3.15%

= $6.3

The remaining income equal to

= Taxable wages - State A earned income

= $7,000 - $6,800

= $200