What is the credit percentage if an employer receives a full credit on FUTA for 2018?

What is the credit percentage if an employer receives a full credit on FUTA for 2018?

• A. .6%
• B. .8%
• C. 5.4%
• D. 6.0%

Answer: (C)

To determine the credit percentage for the Federal Unemployment Tax Act (FUTA) if an employer receives a full credit, it's essential to understand how the FUTA tax structure works. For the year 2018, the standard FUTA tax rate is 6.0%. However, employers who pay state unemployment taxes on a timely basis may receive a credit of up to 5.4% against that rate. This means that if an employer meets the qualifications for a full credit, they can effectively reduce their FUTA tax obligation. Therefore, if the full credit is applied, the effective FUTA rate becomes 0.6% (which is 6.0% minus the 5.4% credit). The correct choice reflects the scenario where the employer receives the maximum credit, resulting in an effective tax of 0.6%. Hence, for 2018, if an employer receives the full credit, the correct credit percentage is indeed that effective rate after applying the maximum credit.

To determine the credit percentage for the Federal Unemployment Tax Act (FUTA) if an employer receives a full credit, it's essential to understand how the FUTA tax structure works. For the year 2018, the standard FUTA tax rate is 6.0%. However, employers who pay state unemployment taxes on a timely basis may receive a credit of up to 5.4% against that rate.

This means that if an employer meets the qualifications for a full credit, they can effectively reduce their FUTA tax obligation. Therefore, if the full credit is applied, the effective FUTA rate becomes 0.6% (which is 6.0% minus the 5.4% credit).

The correct choice reflects the scenario where the employer receives the maximum credit, resulting in an effective tax of 0.6%. Hence, for 2018, if an employer receives the full credit, the correct credit percentage is indeed that effective rate after applying the maximum credit.