Final answer:
To calculate state and federal unemployment taxes for employees, one must apply the given SUTA and FUTA rates to the first $7,000 in annual wages paid by the employer. For Q1 and Q2 wages combined, one must ensure that the total wages considered for each employee do not exceed the $7,000 threshold. FUTA is taxed at 0.8%, while the provided SUTA rate is 5.3%.
Step-by-step explanation:
The student's question involves calculating unemployment taxes that employers must pay for the given wages in the first two quarters. For the federal unemployment tax (FUTA), employers pay 0.8% on the first $7,000 earned by each employee per year. State unemployment tax (SUTA) rates can vary, but we are given a rate of 5.3% for the purpose of this question. As specified, both taxes apply only to the first $7,000 of wages.
Calculations for Quarters 1 and 2:
- Bill Adams: For Q1, Bill earned $415. Since this is below $7,000, we calculate FUTA and SUTA on the full amount. For Q2, Bill earned $8,250, but only the first $7,000 of annual wages is taxed. As his total annual earnings have exceeded $7,000 by Q2, only the remaining portion up to $7,000 from Q1 is taxed.
- Rich Haines: Rich earned more than $7,000 in Q1, so he will be taxed the maximum for both FUTA and SUTA in Q1 and no tax in Q2 because he has already surpassed the $7,000 limit.
- Alice Smooth: Alice earned $3,550 in Q1 and $3,450 in Q2. Both quarterly wages are below $7,000, but the combined total is $7,000, which is the annual limit. So, her wages for both quarters will be taxed at the FUTA and SUTA rates.