Reserve ratio ……………………………………………………… Contribution Rate
0.0% or more but less than 1.0% …………………………………………… 6.7%
1.0% or more but less than 1.2%……………………………………………….. 6.4%
1.2% or more but less than 1.4%……………………………………………….. 6.1%
1.4% or more but less than 1.6%……………………………………………….. 5.8%
1.6 or more but less than 1.8% …………………………………………………. 5.5%
1.8% or more but less than 2.0% ………………………………………………. 5.2%
2.0% or more but less than 2.2% ………………………………………………. 4.9%
2.2% or more but less than 2.4% ………………………………………………. 4.6%
2.4% or more but less than 2.6% ………………………………………………. 4.3%
2.6% or more but less than 2.8%……………………………………………….. 4.0%
2.8% or more but less than 3.0% ………………………………………………. 3.7%
3.0% or more but less than 3.2% ………………………………………………. 3.4%
3.2% or more ……………………………………………………………………………. 3.1%
Hyram Co. which is located in State A had an average payroll of $850,000 for the three 12 month periods ending on June 30, 2013 (computation date for the tax year 2014). As of June 30, 2013, the total contributions that had been made to Hyram Company’s reserve account, in excess of the benefits charged amounted to $17,440. Compute:
5–12A. (a) Hyram’s reserve ratio for 2013 $XX,XXX ÷ $XXX,XXX =
(b) 2014 contribution rate for the company _______ %
(c) Smallest contribution that the company can make in order to reduce its tax rate if State A permits voluntary contributions
Balance needed to qualify for 4.6% rate: $XXX,XXX × X.XXX=$XX,XXX
Less: Actual balance………………………………………………………. XX,XXX
Contribution needed………………………………………………………. $X,XXX
Tax savings realized by the company, taking into consideration made in (c) if the taxable payroll in 2014 is $980,000
(d) Tax without voluntary contribution…. $XXX,XXX × X.XXX = $XX,XXX
Tax with voluntary contribution………. $XXX,XXX × X.XXX = XX,XXX
Tax decrease resulting from voluntary contribution……….. $X,XXX
Less: Amount of voluntary contribution………………………….. X,XXX
Tax savings realized………………………………………………………. $X,XXX
Marlene Grady and Pauline Monroe are partners engaged in operating The G&M Doll shop which has employed the following persons since the beginning of the year. Grady and Monroe are each paid a weekly salary allowance of $950. The doll shop is located in a state that requires unemployment compensation contribution of employers of one or more individuals. The company is subject to state contributions at a rate of 3.1% for wages not in excess of $8100. Compute each of the following amounts based upon the 41st weekly payroll period for the week ending October 10, 2014:
5–14A. (a) Taxable OASDI HI
Earnings (6.2%) (1.45%)
V. Hoffman………………………………… $392.31
A. Drugan………………………………….. 288.46
G. Beiter…………………………………….. 180.00
S. Egan……………………………………… 220.00
B. Lin…………………………………………. 160.00
Grady and Monroe (partners are not taxed under FICA)
(b) Taxable payroll: $1,240.77
OASDI……………………………………………… $1,240.77 × 0.062 =
HI……………………………………………………… $1,240.77 × 0.0145 =
(c) Taxable earnings:
G. Beiter……………………………………………………………….. $XXX
B. Lin……………………………………………………………………. XXX
$XXX
SUTA tax………………………………………………….. $XXX × 0.031 = $XX.XX
(d) Taxable earnings:
B. Lin……………………………………………………………………. $XXX
Net FUTA tax……………………………………………. $XXX × 0.006 = $X.XX
The remaining employees are beyond the $7,000 limit; therefore,
there is no FUTA tax on their salaries.
(e) FICA……………………………………………………………….. $XX.XX
SUTA……………………………………………………………… XX.XX
Net FUTA……………………………………………………….. X.XX
Total payroll taxes…………………………………………… $XXX.XX
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