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Unread 12-05-2007, 10:09 PM
 
Location: ¡Ninguno de su negocio!
570 posts, read 1,247,047 times
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Question Current liability or Long-term liability?

Just a quick question for anyone working in the business field. I'm stuck on a question for one of my assignments(I'm majoring in accounting) and I just can't figure out the answer.

Is FUTA(Federal Unemployment taxes) a current liability or a long-term liability? Is it even a liability? Sorry if this may seem like a silly question, I've just been studying so hard, the easiest questions are starting to become the hardest ones to me...

I would be happy if at least one person could answer. It would be nice if there is a website you could refer me to for additional information if possible. Thanks in advance!
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Unread 12-05-2007, 10:30 PM
 
103 posts, read 283,681 times
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You don't withhold the FUTA tax from an employee's wages; the business itself must pay this tax.
"Liability for tax. You must pay the FUTA tax if during the current or the preceding calendar year you meet either of the following tests:
  • You pay wages totaling at least $1,500 to your employees in any calendar quarter, or
  • You have at least one employee on any given day in each of 20 different calendar weeks (the 20 weeks need not be consecutive and the "one employee" need not be the same individual). For this purpose, a "calendar week" is a period of seven successive days beginning with Sunday and ending at the close of the following Saturday. However, short weeks at the beginning and end of a calendar year are counted as calendar weeks.
Once you meet either of the tests, you become liable for the FUTA tax for the entire calendar year and for the next calendar year as well. For example, if you first met the 1-in-20 test in December 2006, you would have been responsible for the tax with respect to the wages you paid during the entire 2006 calendar year as opposed to just the wages you paid after you met the test. You would also continue to be liable for the FUTA tax during the 2007 calendar year, even if you fail to meet both the wages-paid test and the 1-in-20 test during that year."



Sounds like a liability. Is next year considered long term?
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Unread 12-06-2007, 06:58 AM
 
201 posts, read 624,737 times
Reputation: 75
When the FUTA taxes are payable, they are an accrued liability, and are generally a current liability.

When they are paid, they become an expense which is eventually reflected in stockholders equity.


The only things generally reflected in long term liabilities are items that will be taking years to pay off or fully earn.
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Unread 12-06-2007, 08:25 AM
 
Location: ¡Ninguno de su negocio!
570 posts, read 1,247,047 times
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Thanks for the response, I understand it better now.
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Unread 03-10-2010, 03:01 PM
 
1 posts, read 5,501 times
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Default Futa

Hello! FUTA is a current liability. Generally, a company will charge payroll taxes to a current liability account until they are paid. A company does not pay the taxes during every pay period. As a result, these taxes must be accrued. A corporation will have an entry for salary expense which is to record the employee "checks" and one entry for payroll expense. The payroll expense entry will look like:

Payroll tax expense 1,245
F.I.C.A. Taxes Payable 765
F.U.T.A. 80
S.U.T.A. 400

As you can see, these are all payables and recorded as a current liability. Once the amount is remitted to the government, the liability is eliminated.

I hope this helps!

Quote:
Originally Posted by complexsimplicity View Post
Just a quick question for anyone working in the business field. I'm stuck on a question for one of my assignments(I'm majoring in accounting) and I just can't figure out the answer.

Is FUTA(Federal Unemployment taxes) a current liability or a long-term liability? Is it even a liability? Sorry if this may seem like a silly question, I've just been studying so hard, the easiest questions are starting to become the hardest ones to me...

I would be happy if at least one person could answer. It would be nice if there is a website you could refer me to for additional information if possible. Thanks in advance!
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