Mark, who has a gardening business in New Hampshire, has three people working fo
ID: 1191303 • Letter: M
Question
Mark, who has a gardening business in New Hampshire, has three people working for him: Joe, Mary, and Hank. Joe is the bookkeeper and has two other clients besides Mark. Mary is a landscape designer who also does plant installations and manages the greenhouse for Mark. Hank takes care of the watering, planting, and feeding of the greenhouse plants, drives materials where they need to go, and generally assists the landscape designer. Mark pays himself $25,000 a year. Joe gets $15,000 a year. Mary earns $300 per week, and also gets use of the truck and gardening equipment for her own organic food business. Hank earns $10 per hour in season, and needs to find other work when the growing season ends in October. What does Mark need to pay in federal unemployment tax act (FUTA) and state unemployment tax act (SUTA) taxes? What are the contributing factors? How often does he need to make deposits? What could he do to reduce his unemployment tax expenditure? What documentation does he need to file?
Explanation / Answer
The federal unemployement tax is caluclated at 6.2% of the first $7,000 gross pay per employee.
Mark,Joe and Mary get more than 7000 as their yearly salaries. Since Hank's total salasry is variable and assuming he also gets 7000 a year, He has to pay 7000*0.062*4 = $1,736 as FUTA
For the Nwe Hampshire State unemployment tax, the base is $14,000 and contribution ranges from 1.10% to 9.50%.
Assuming her pays 1.10 % and all their yearly salaries is greater than 14,000, he has to pay 0.0110*4*14000 = $616 as SUTA
The governing factor for FUTA and SUTA is the gross salary. The deopists needs to be done by the employer only and there is no contibution from the employee and has to be deposited quarterly
He could reduce tax expenditure by reducing the number of week Mary and Hank work and providing a lower salary to them so that gross salary per year is less than 14,000 to save on SUTA
He needs to file their employement status giving the employees SSN. He can file pay slips peratining to their reduced salary to reduce the tax