What is FUTA Tax?

The 2012 FUTA Tax return (Form 940) is due on January 31, 2013.  The Futa Tax rate is 0.6% of the initial first $7,000 in wages.  Effectively, the maximum FUTA tax is $42 per employee per year.

Federal Tax Rate

The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. You report and pay FUTA tax separately from Social Security and Medicare taxes and withheld income tax. You pay FUTA tax only from your own funds. Employees do not pay this tax or have it withheld from their pay. Employers (Your Boss) pays for this tax.

  • Report FUTA taxes on Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return.

The FUTA tax rate is 6.2%* of taxable wages. The taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Employers who pay the state unemployment tax, on a timely basis, will receive an offset credit of up to 5.4% regardless of the rate of tax they pay the state. Therefore, the net FUTA tax rate is generally 0.8% (6.2% – 5.4%), for a maximum FUTA tax of $56.00 per employee, per year (.008 X $7,000. = $56.00). State law determines individual state unemployment insurance tax rates.

The FUTA tax rate is 6.2% for Jan 1, 2011 to Jun 30, 2011 and decrease to 6.0% from Jul 1, 2011 to Dec 31, 2011.  The FUTA tax rate is 6.0% for tax year 2012.

FUTA tax is filed annually using Form 940.  The total amound due can’t exceed over $500 or else IRS will assess a penalty and interest charges.  If the amount due is more than $500, the business is required to submit deposit payments in advance. Most accountants will help you process this form as it is part of the payroll taxes.

California SUTA Unemployment Tax Pennsylvania SUTA Unemployment Tax
Texas SUTA Unemployment Tax Ohio WIC SUTA Unemployment Tax
New York SUTA Unemployment Tax Michigan SUTA Unemployment Tax
Florida SUTA Unemployment Tax Georgia SUTA Unemployment Tax
Illinois SUTA Unemployment Tax North Carolina SUTA Unemployment Tax

SUTA Unemployment Tax in Other States