Refer to the partially completed payroll register that you
worked on at the end of Chapter 4. You will now compute
the employer’s liability for unemployment taxes (FUTA
and SUTA) for the pay of January 14. These computations
will be used at the end of Chapter 6 in recording the payroll
tax entries.
To compute the employer’s liability for unemployment
taxes, proceed as follows:
1. Enter each employee’s gross earnings in the Taxable
Earnings—FUTA and SUTA columns.
2. Total the Taxable Earnings—FUTA and SUTA
columns.
3. At the bottom of your payroll register, compute the
following
a. Net FUTA tax. Since this is the first pay period of
the year, none of the employees are near the $7,000
ceiling; therefore, each employee’s gross earnings is
subject to the FUTA tax.
b. SUTA tax. Since Olney Company is a new
employer, Pennsylvania has assigned the company a
contribution rate of 3.703% on the first $8,000 of
each employee’s earnings. Employees pay 0.08% on
total gross pay.