Future Business Leaders of America (FBLA) Business Calculations Practice Test

If Federal Unemployment Tax is 6.2% on the first $7,000 of wages, how much does Sam's employer have to pay if Sam earns $10,500?

1. $515.00

2. $434.00

3. $217.00

4. $651.00

The correct answer is: $434.00

To determine how much Sam's employer must pay in Federal Unemployment Tax (FUTA), it's important to recognize that the tax only applies to earnings up to $7,000. This means that even though Sam earns $10,500, the tax calculation is based solely on the first $7,000 of his wages. The FUTA rate is 6.2%. To calculate the tax owed by the employer, you first take 6.2% of $7,000. Here’s the calculation step-by-step: 1. **Identify the taxable wage base**: Since the FUTA tax is capped at $7,000, we will use that amount. 2. **Calculate the tax**: Multiply $7,000 by the tax rate of 6.2% (or 0.062): \[ 7,000 \times 0.062 = 434 \] The result of this calculation is $434.00, which represents the total FUTA tax that Sam's employer is required to pay based on his earnings. This is the correct answer, demonstrating that even if an employee earns more than the taxable amount, the employer's liability for FUTA is limited to the capped wage