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Computing Payroll Taxes

1- Timmons Co., which has a taxable payroll of $500,000, is subject to FUTA tax of 6.2% and a state contribution rate of 5.4%. However, because of stable employment experience, the company's state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Timmons Co.?
a. $58,500
b. $41,000
c. $20,000
d. $14,000
e. none of the above

2- The total payroll of Waters Company for the month of October, 2007 was $360,000, of which $90,000 represented amounts paid in excess of $90,000 to certain employees. $300,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $90,000 of federal income taxes and $9,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to $90,000 and 1.45% in excess of $90,000. What amount should Waters record as payroll tax expense?
a. $118,620.
b. $113,040.
c. $23,040.
d. $28,440.
e. none of the above

Solution Preview

1. Timmons total unemployment tax follows:

Federal: $500,000*.008=$ 4,000 (Because state payments are made, the 6.2% rate is credited 5.4%)
State: $500,000*.02 = ...

Solution Summary

This solution describes the procedures for computing a company's federal unemployment and FICA, as well as its state unemployment, tax liabilities.

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