Question

Amazon Appliance Company has three installers. Larry earns $355 per week, Curly earns $460 per week, and Moe earns $585 per week. The company's SUTA rate is 5.4%, and the FUTA rate is 6.2% minus the SUTA. As usual, these taxes are paid on the first $7,000 of each employee's earnings. a. How much SUTA and FUTA tax does Amazon owe for the first quarter of the year? SUTA: $ FUTA: $ b. How much SUTA and FUTA tax does Amazon owe for the second quarter of the year? SUTA: $ FUTA: $

Answer 1

(a) The amount of SUTA and FUTA taxes that Amazon owes for the first quarter of the year are as follows:

SUTA = $378

FUTA = $56

(b) The amount of SUTA and FUTA taxes that Amazon owes for the second quarter of the year are as follows:

SUTA = $756

FUTA = $112

Explanation:

Since there are 52 weeks in a year quarter and 4 quarters in a year, the number of weeks in a quarter can therefore be calculated as follows:

Number of weeks a quarter = Number of weeks in a year / Number of quarters in a year = 52 / 4 = 13

Therefore, quarterly wage of each employee can calculated as follows:

Employee quarterly wage = Employee weekly wage * Number of weeks in a quarter = Employee weekly wage * 13 ………………………………. (1)

We can now proceed as follows:

a. How much SUTA and FUTA tax does Amazon owe for the first quarter of the year?

Using equation (1), we have:

Larry’s quarterly wage = $355 * 13 = $4,615

Curly’s quarterly wage = $460 * 13 = $5,980

Moe’s quarterly wage = $585 * 13 = $7,605

Since only Moe earns more than $7,000 within the first quarter, the amount of SUTA and FUTA taxes owed by Amazon for the first quarter of the year will be calculated based on the Moe’s wage alone as follows:

SUTA = 5.4% * $7,000 = $378

FUTA = (6.2% * $7,000) - SUTA tax = $434 - $378 = $56

Therefore, the amount of SUTA and FUTA taxes that Amazon owes for the first quarter of the year are as follows:

SUTA = $378

FUTA = $56

b. How much SUTA and FUTA tax does Amazon owe for the second quarter of the year? SUTA: $ FUTA: $

Since SUTA and FUTA have been calculated based on first $7,000 of Moe’s quarterly wage in part a above, he will no longer be considered in the calculation for the second quarter.

We therefore proceed as follows:

Larry’s wage for 2 quarters = Larry’s quarterly wage * 2 = $4,615 * 2 = $9,230

Curly’s wage for 2 quarters = Curly’s quarterly wage * 2 = $5,980 * 2 = $11,960

Since both Larry and Curly have earned more than $7,000 within 2 quarters, the amount of SUTA and FUTA taxes owed by Amazon for the second quarter of the year will be calculated based on the first $7,000 of the two of them as follows:

SUTA = 5.4% * $7,000 * 2 = $756

FUTA = (6.2% * $7,000 * 2) - SUTA tax = $868 - $756 = $112

Therefore, the amount of SUTA and FUTA taxes that Amazon owes for the second quarter of the year are as follows:

SUTA = $756

FUTA = $112