Question

Cohle Industries has a taxable payroll of $350,000. The company is subject to a 6.2% FUTA tax rate and a 5.4% state contribution rate. However, due to Cohle’s stable employment experience, the company’s state rate has been reduced to 2%. How much combined federal and state unemployment tax must Cohle pay?

Answer 1

$9,800

Step-by-step explanation:

Given:

Cohle's taxable payroll = $350,000

FUTA tax rate = 6.2%

State contribution rate = 5.4%

Since the company is subject to state unemployment insurance tax (state contribution), It can avail FUTA credit of 5.4%.

So, Cohle's FUTA tax rate become 6.2% - 5.4% = 0.8%

FUTA tax = 0.008 × 350,000 = $2,800

State rate is reduced to 2%

State rate = 0.02 × 350,000 = 7,000

Total tax payable = 7,000 + 2,800

= $9,800