Tag Archives: Texas Futa Tax

Texas FUTA Tax

What is Texas Futa Tax?

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. The FUTA tax is separate from the Social Security Tax, Medicare Tax, Unemployment Insurance Tax and Withholding Income Tax.

How much is Texas FUTA Tax?

The FUTA tax rate is 6.0% 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 a FUTA reduction credit of up to 5.4% regardless of the rate of tax they pay the state. Therefore, the net FUTA tax rate is generally 0.6% (6.0% – 5.4%), for a FUTA tax of $42 per employee, per year (.006 X $7,000. = $42.00).

Texas – FUTA Tax Rate: is 0.6%
Texas – FUTA Tax Limit: $7,000

Minimum FUTA Tax per employee per year  (0.6%): $42
Maximum FUTA Tax per employee per year (6.0%): $420

Year State Futa Tax Rate Reduction Credit Net FUTA Rate FUTA Taxable Wage Base
2016 Texas 6.0% -5.4% 0.6% $7000

Texas FUTA Tax Rate and FUTA Tax Limits

The FUTA Tax is 6.0% of taxable wage on the first $7,000 of wages.  There is a reduction of 5.4% FUTA Credit if State Unemployment Insurance is filed and paid to the state.  The Net FUTA tax is therefore 0.6% of the first $7,000 in wages. There is no FUTA Tax for any wages over $7,000 per employee per year. The maximum FUTA Tax for each employee is limited to $42 per employee per year.

Texas FUTA Tax Form

To file FUTA Tax, employers need to use Form 940.  To qualify for FUTA reduction credit, employers will also need to file and pay their State Unemployment Insurance (UI) tax.

Type Form Form Description
IRS Form 940 Federal FUTA Tax Form

When is FUTA Tax Due?

Texas FUTA Tax is due every year on January 31.  The FUTA Tax must be under $500 by January 31.  If the FUTA Tax is over $500, employers must deposit enough FUTA Tax every quarter to the IRS.

Who pays for Texas FUTA Tax?

FUTA Tax is paid by the employer and should not be withheld from the employee’s paycheck.  Unemployment Tax and FUTA Tax are the two taxes that are paid by the employer.

Social Security Tax, Federal Withholding and State Withholding are taxes that are deducted from employee’s paycheck.

Tax Who Pays The Tax?
FUTA Tax Employer Responsibility
Unemployment Insurance Employer Responsibility
Social Security Tax 50% Employee Responsibility (6.2%) 50% Employer Responsibility (6.2%)
Medicare Tax 50% Employee Responsibility (1.45%) 50% Employer Responsibility (1.45%)
Federal Withholding Tax Employee Responsibility
State Withholding Tax Employee Responsiblity

Frequently Asked Questions on NE FUTA Taxes

  1. What does FUTA Tax stand for? Federal Unemployment Tax Act
  2. What is the FUTA Income Limit for 2015? $7,000.  Wages over $7,000 are exempt from FUTA Tax
  3. Who pays for Texas FUTA Tax? Employer pays for the FUTA Tax
  4. I need Texas Recertification Letter for IRS.  Click here for more information on Recertification Letter

Click here for more Frequently Asked Questions on FUTA Tax and Unemployment Tax.

For More Information on Texas Futa Tax and State Unemployment Tax

For more information, please contact Internal Revenue Service (IRS) regarding FUTA Tax (Form 940) at 800-829-4933.

For State Unemployment Tax, please visit Texas Unemployment Insurance Department.

Agency  Website
Internal Revenue Service www.irs.gov
Texas Dept of Labor www.twc.state.tx.us

Texas five largest cities in terms of population: Houston, San Antonio, Dallas, Austin and Fort Worth.  The FUTA Tax and Unemployment Insurance is the same for all the locations.