Learn the basics of the FUTA tax in this article.
The Federal Unemployment Tax Act (FUTA) is an unemployment tax companies must pay on behalf of their employees. If your business paid at least $1,500 in wages during any business quarter in the current or previous year, you must pay FUTA.
FUTA – which has a different system and rate for each state – provides compensation to workers who’ve lost their jobs. The federal rate is 6.0%, and if employers live in a state with its own unemployment tax, they can earn a 5.4% credit for taxable income. That is, if they pay their State Unemployment Tax (SUTA) on time, and regularly.
Because of the SUTA tax credit, most employees end up paying 0.6% of the first $7,000 per year of each employee’s salary. The wage base for FUTA is $7,000. Generally, that equals a maximum cost for FUTA per employee per year as $42. The more employees, the more FUTA.
To determine what you must pay in FUTA, check out Form 940 here.
Celebrate National Payroll Week 2024, September 2-6! Join the fun, take the survey for a chance to win big, and honor payroll pros. Discover the joy of getting paid and learn more about this year’s theme: "America Works Because We’re Working for America ®."
Tax Day is on Monday, Apr 15, 2024. Not ready to file? Submit an electronic request to the IRS for an extension ASAP!
IRS has updated tax brackets for 2024. See how this affects your first paycheck this year!
