A contractor has three employees with annual wages of $45,000, $32,000, and $15,000 respectively. What is the total FUTA tax liability?
Correct Answer
C) $126
FUTA is calculated on the first $7,000 of wages per employee at 0.6%. Total FUTA = 3 employees × $7,000 × 0.6% = $126.
Why This Is the Correct Answer
FUTA (Federal Unemployment Tax Act) tax is calculated at 0.6% on only the first $7,000 of wages per employee per year. Since all three employees earn more than $7,000 annually, the calculation uses the $7,000 wage base for each employee. The total FUTA liability is 3 employees × $7,000 × 0.6% = $126.
Why the Other Options Are Wrong
Option A: $252
This answer incorrectly applies the FUTA rate to a higher wage base, likely using $42,000 (3 × $14,000) instead of the correct $21,000 (3 × $7,000) wage base.
Option B: $552
This answer appears to use an incorrect FUTA rate or wage base calculation, possibly applying 0.6% to the total of all wages ($92,000) rather than the limited wage base of $7,000 per employee.
Option D: $378
This answer uses an incorrect calculation method, possibly applying 0.6% to $63,000 (9 × $7,000) or using a wrong rate on the correct wage base.
Memory Technique
Remember 'FUTA 7-6': FUTA applies to first $7,000 per employee at 0.6% rate
Reference Hint
Look up 'Payroll Taxes' or 'FUTA Tax' in the Business and Finance chapter of your contractor reference manual
More Business & Finance Questions
A contractor's license expires on March 31st. If they submit a renewal application on April 15th, what additional requirement must be met under Florida regulations?
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
In Florida, what is the minimum workers' compensation insurance coverage required for construction companies with employees?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
People Also Study
Previous Question
A contractor fails to obtain a building permit before starting a $75,000 addition project. Under Florida Statute 455.228, what action can the licensing board take?
Next Question
A general contractor is calculating their annual overhead costs. If their total annual payroll is $850,000 and the current FICA rate is 7.65%, what is the employer's FICA contribution?