Finance | The Tax Resources Blog

Posts Tagged ‘finance’

Unemployment Tax Rates By State

August 6th, 1996

Question: Can anyone offer any help?

Oates Company’s payroll for the week ending January 15 amounted to $95,000 for Office Salaries and $150,000 for Store Wages. None of the employees has reached the earnings limits specified for federal or state employer payroll taxes. The following deductions were withheld from employees’ salaries and wages:
Federal Income Tax $50,000
State Income Tax 9,000
FICA Taxes 19,600
Union Dues 2,700
United Fund 1,800

Federal Unemployment Tax (FUTA) rate is 6.2% less a credit equal to the rate paid for state unemployment taxes. The state Unemployment Tax (SUTA) rate is 5.4%.
Prepare the journal entry to record the weekly payroll ending January 15 and also the employer’s payroll tax expense on the payroll.

Answer: January 15

DR Payroll Expense $245,000
Payroll Taxes 34,790

CR Cash ($161,900)
SUTA Payable ( 13,230)
FUTA Payable ( 1,960)
State Taxes Payable ( 9,000)
Federal Taxes Payable ( 50,000)
FICA Payable ( 39,200)
Union Dues Payable (2,700)
Union Fund Payable (1,800)

Total Payroll Expense is equal to SUTA tax, FUTA tax and Employer portion of FICA tax. ($13,230+ 1,960 + 19,600) Accounting is not this hard in real life, but the way I got the FUTA tax was by taking total payroll $245,000*.054 = 13,230, then for the credit, I multiplied $245,000 * .062 = 15,190 – 13,230 (credit) = 1960. That’s how I think they want you to calculate it based on the wording even though that is not how it is calculated in the real world at all. Hope this helps. It’s been a while since I’ve seen the word problems like this. I don’t miss them!