Achievement Test Chapter 5

1.  The federal unemployment tax is imposed on employers, and thus, is not deducted from employees’ wages.

2  Educational assistance payments to workers are considered nontaxable wages for unemployment purposes.

3.  For the purpose of the FUTA tax, members of partnerships are considered employees.

4.  FUTA coverage does not include service of any nature performed outside the United States by a citizen of the United States for an American employer.

5.  The location of the employee’s residence is the primary factor to be considered in determining coverage of an employee who works in more than one state.

6.  A bonus paid as remuneration for services is not considered taxable wages for unemployment tax purposes even if the employee has not exceeded the taxable wage base.

7. In the case of an employee who changes jobs during the year, only the first employer must pay FUTA tax on that employee’s earnings.

8  The maximum credit that can be applied to the FUTA tax because of SUTA contributions is 5.4%.

9  If an employer pays a SUTA tax of 2.0%, the total credit that can be claimed against the FUTA tax is 2.0%.

10.  E-pay or a major debit or credit card can be used to pay the required FUTA deposits during the year.

11. Employer contributions made to employees’ 401(k) plans that are included in total payments on Form 940 are also then deducted as exempt payments.

12.  The payments of FUTA taxes are included with the payments of FICA and FIT taxes and are paid as one lump sum.

13.  If an employer’s FUTA tax liability for the 1st quarter is $935, no payment is required for the 1st quarter.

14.  If a business has ceased operations during the year, as long as the payments of the FUTA taxes have been made, a Form 940 does not need to be completed for that year.

15.  If all wages were excluded from SUTA taxes, but were subjected to FUTA, the FUTA tax rate would be 6.0%.

16.  In certain circumstances, a FUTA tax payment can be remitted with Form 940.

17.  All of the states allow employers to make voluntary contributions into their state unemployment fund so that a lower tax contribution rate would be assigned.

18. Employers have to pay a FUTA tax on only the first $3,500 of each part-time employee’s earnings (1/2 of the full $7,000 limit).

19.  Only employers who paid state unemployment taxes in more than one state or paid wages in a credit reduction state are required to complete Schedule A of Form 940.

20  Form 940 can also be used to file an amended return.

21. 

Truson Company paid a 4% SUTA tax on the taxable wages of $108,500. The taxable wages under FUTA were $89,400. What was the net FUTA tax of Truson Company? Round your answer to the nearest cent.

22.

Jason Jeffries earned $10,200 while working for Brown Company. The company’s SUTA tax rate is 2.9% of the first $7,000 of each employee’s earnings. Compute the total unemployment taxes (SUTA and FUTA) that Brown Company should pay on Jeffries’ earnings.

23.

Caruso Company’s SUTA rate for next year is 2.9% because its reserve ratio falls in its state’s 8% to less than 10% category [(contributions – benefits paid) ÷ average payroll = $93,500 ÷ $971,500 = 9.62%].

If the next category (10% to less than 12%) would give Caruso a lower tax rate of 2.3%, what would be the amount of the voluntary contribution needed to get Caruso to that next category?

24.

Fred Stone is an employee of Henrock Company. During the first part of the year, Stone earned $4,340 while working in State Q. For the remainder of the year, the company transferred him to State S where he earned $27,000. Henrock Company’s tax rate in State Q is 4.6%, and in State S, 4.0% on the first $7,000.

If reciprocal arrangements exist between the two states, determine the SUTA tax that the company paid on Stone’s earnings in State S. Round your answer to the nearest cent.

25.

Leinart Company had taxable wages (SUTA and FUTA) totaling $175,000. During the year, the company was late in paying its state contributions of 3.6% and is therefore subject to the FUTA credit reduction. Determine the amount of net FUTA tax.

26.

Englesbe Company’s FUTA tax liability was $289.50 for the 1st quarter; $129.80 for the 2nd quarter; $123.00 for the 3rd quarter; $16.00 for the 4th quarter. The company’s first required payment of FUTA taxes is $