A contractor's annual payroll is $180,000. Calculate the annual State Unemployment Tax (SUTA) if the rate is 3.4% on the first $7,000 per employee for 6 employees:
Correct Answer
C) $1,428
SUTA = 6 employees × $7,000 × 3.4% = $1,428. SUTA is calculated per employee up to the wage base limit, not on total payroll.
Why This Is the Correct Answer
SUTA is applied only to the first $7,000 of each employee's wages (the taxable wage base), not on total payroll. Calculation: 6 employees × $7,000 × 3.4% = 6 × $238 = $1,428. The $180,000 total payroll is irrelevant once each employee has exceeded the wage base.
Why the Other Options Are Wrong
Option A: $1,190
Incorrect. $1,190 results from using only 5 employees (5 × $7,000 × 3.4% = $1,190) or from applying a different rate. The problem specifies 6 employees.
Option B: $6,120
Incorrect. $6,120 results from applying 3.4% to the entire $180,000 payroll ($180,000 × 3.4% = $6,120). This ignores the critical SUTA rule that tax is capped at the wage base limit ($7,000) per employee.
Option D: $2,040
Incorrect. $2,040 results from using a different rate (e.g., applying a 4.0% rate: 6 × $7,000 × 4.0% = $1,680) or a miscalculation. Neither matches the given rate of 3.4%.
Memory Technique
SUTA = 'Stop Under The Amount' — the tax stops once each employee's wages reach the wage base ceiling. You are taxed on the ceiling amount, not the full payroll.
More California Questions
A contractor is bidding on a public works project in Los Angeles County with a contract value of $2,000,000. The prevailing wage determination shows carpenter wages at $45.50 per hour. What additional amount must be paid for health and welfare benefits?
A construction company has 15 employees working on a project. One employee suffers a work-related injury. Under California law, what is the primary difference between Cal/OSHA and federal OSHA jurisdiction?
A contractor employs 8 workers and pays total wages of $480,000 annually. If the Unemployment Insurance (UI) tax rate is 3.4% on the first $7,000 of each employee's wages, what is the total annual UI tax owed?
Under Cal/OSHA regulations, what is required when a construction site has a trench excavation deeper than 5 feet?
A public works project requires certified payroll records. The prevailing wage for an electrician is $52.75 per hour with $18.50 in fringe benefits. If an electrician works 8 hours, what is the total prevailing wage obligation?
On a prevailing wage project, a carpenter's regular rate is $28/hour, but the prevailing wage is $35/hour with $8/hour in benefits. What must the contractor pay if the carpenter already receives $6/hour in benefits?
A California contractor has quarterly payroll of $85,000. What is the State Disability Insurance (SDI) withholding amount if the current SDI rate is 0.9% and the wage base limit is $153,164 annually?
Under California law, which statement about business entity liability is CORRECT?
XYZ Contracting LLC has 8 employees in California. An employee is injured on the job and requires medical treatment costing $15,000. The company has no workers' compensation insurance. What is XYZ's potential liability?
A general contractor subcontracts electrical work to an LLC. The electrician works exclusively for this contractor, uses the contractor's materials, and follows the contractor's daily schedule. Under AB5, this relationship is likely:
People Also Study
Business & Financial Management
120 questions · 70% to pass
Contract Administration
60 questions · 70% to pass
Project Management
60 questions · 70% to pass