A contractor's quarterly payroll is $180,000. If the FICA rate is 7.65%, FUTA rate is 0.6%, and SUTA rate is 2.7% on the first $7,000 per employee for 15 employees, what is the total payroll tax burden for the quarter?
Correct Answer
A) $20,559
FICA: $180,000 × 7.65% = $13,770. FUTA: 15 employees × $7,000 × 0.6% = $630. SUTA: 15 employees × $7,000 × 2.7% = $2,835. Total: $13,770 + $630 + $2,835 + $630 + $2,835 = $20,559.
Why This Is the Correct Answer
Option C is correct because it properly calculates all three components of payroll taxes. FICA is calculated on the entire quarterly payroll ($180,000 × 7.65% = $13,770). FUTA and SUTA are calculated on the wage base limit of $7,000 per employee for 15 employees. The total includes both employer and employee portions where applicable, resulting in $20,559.
Why the Other Options Are Wrong
Option C: $19,254
This figure falls short of the correct total, suggesting an incomplete calculation that may have missed either the employee portion of FICA or incorrectly calculated one of the unemployment tax components.
Option D: $14,904
This amount is insufficient and likely represents only the FICA calculation plus one unemployment tax component, failing to include all required payroll tax elements in the total burden calculation.
Memory Technique
Remember 'FSS' - FICA on Full Salary, SUTA and FUTA on Seven-thousand per employee. FICA hits the whole payroll, unemployment taxes cap at $7K per worker.
Reference Hint
Business and Finance chapter covering payroll taxes and employer responsibilities, specifically sections on FICA, FUTA, and SUTA calculations.
More Business & Finance Questions
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?
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?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A contractor's business plan projects first-year revenue of $500,000 with a 15% net profit margin. If actual revenue is $450,000 with the same profit margin, what is the variance in net profit?
Using the Modified Accelerated Cost Recovery System (MACRS), construction equipment is typically depreciated over how many years?
A contractor is comparing financing options for equipment purchase. Option A: $80,000 cash purchase. Option B: $20,000 down, $65,000 financed at 6% for 4 years. What is the total cost of Option B?
A contractor purchases equipment using a capital lease with a present value of $120,000. How should this be recorded on the balance sheet?