What is the FUTA tax rate?

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Multiple Choice

What is the FUTA tax rate?

Explanation:
FUTA tax is set at a base rate and then reduced by credits for state unemployment taxes. The base federal rate is 6.0% on the first $7,000 of wages per employee. Employers can receive a credit against FUTA for state unemployment taxes paid, up to a limit. In this case, the effective net FUTA rate is 0.8% because the state credit reduces the 6.0% by 5.2% (6.0% − 5.2% = 0.8%). So, per employee, FUTA tax would be 0.008 × 7,000 = $56 for the year. If the state credit were the maximum 5.4%, the net rate would be 0.6% instead. The other options reflect either the gross rate, a different credit amount, or a misinterpretation of the credit.

FUTA tax is set at a base rate and then reduced by credits for state unemployment taxes. The base federal rate is 6.0% on the first $7,000 of wages per employee. Employers can receive a credit against FUTA for state unemployment taxes paid, up to a limit. In this case, the effective net FUTA rate is 0.8% because the state credit reduces the 6.0% by 5.2% (6.0% − 5.2% = 0.8%). So, per employee, FUTA tax would be 0.008 × 7,000 = $56 for the year. If the state credit were the maximum 5.4%, the net rate would be 0.6% instead. The other options reflect either the gross rate, a different credit amount, or a misinterpretation of the credit.

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