A Florida contractor has annual payroll of $850,000 and a SUTA rate of 2.7% on the first $7,000 per employee for 25 employees. What is the SUTA tax liability?
Correct Answer
B) $4,725.00
SUTA is calculated on the first $7,000 per employee. 25 employees × $7,000 = $175,000 taxable wages. $175,000 × 2.7% = $4,725.00.
Why This Is the Correct Answer
SUTA (State Unemployment Tax Act) is calculated on the first $7,000 of wages per employee, regardless of total payroll. With 25 employees, the taxable wage base is 25 × $7,000 = $175,000. Applying the 2.7% SUTA rate: $175,000 × 0.027 = $4,725.00. The annual payroll of $850,000 is irrelevant since SUTA only applies to the first $7,000 per employee.
Why the Other Options Are Wrong
Option A: $22,950.00
$22,950 results from incorrectly applying the 2.7% rate to the entire annual payroll of $850,000 ($850,000 × 0.027). This ignores the $7,000 per employee wage cap that limits SUTA taxation.
Option C: $2,362.50
$2,362.50 appears to be half the correct answer, possibly from dividing the correct calculation by 2 or making an error in the rate calculation (using 1.35% instead of 2.7%).
Option D: $7,000.00
$7,000 represents the wage base per employee but is not the total tax liability. This ignores both the number of employees (25) and the tax rate (2.7%).
Memory Technique
Remember 'SUTA SEVEN': SUTA applies to the first $7,000 per employee. Count employees × $7,000 × rate = tax.
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?