A contractor's employee earns $4,200 per month. The company's SUTA rate is 2.7% on the first $7,000 of wages. What is the total SUTA tax owed for this employee for the year?
Correct Answer
B) $189.00
SUTA is calculated only on the first $7,000 of wages per employee per year. $7,000 × 2.7% = $189.00. Even though the employee earns $50,400 annually, SUTA is capped at the $7,000 wage base.
Why This Is the Correct Answer
SUTA (State Unemployment Tax Act) has a wage base limit of $7,000 per employee per year in Florida. This means that regardless of how much an employee earns annually, SUTA tax is only calculated on the first $7,000 of their wages. The calculation is straightforward: $7,000 × 2.7% = $189.00. Even though this employee earns $4,200 × 12 = $50,400 annually, the SUTA tax is capped at the wage base limit.
Why the Other Options Are Wrong
Option C: $1,360.80
This appears to be double the correct amount ($189 × 2 = $378), possibly from incorrectly applying the rate twice or misunderstanding the wage base calculation.
Option D: $378.00
This amount ($42.00) appears to be 2.7% of only one month's wages ($4,200 × 2.7% = $113.40) or some other partial calculation, ignoring the proper annual wage base.
Memory Technique
Remember 'SUTA STOPS at Seven' - SUTA tax calculation stops at the $7,000 wage base, no matter how much more the employee earns.
Reference Hint
Florida Construction Industry Licensing Board reference materials, Chapter on Payroll Taxes and Employment Law, specifically the section covering State Unemployment Tax requirements
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