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What Is The Federal Unemployment Tax (FUTA)?

October 3rd

unemployment taxIn the event that you are a proprietor of a small business, you may be curious as to what the Federal Unemployment Tax is and how it applies to your personal tax calculations. The tax itself provides for unemployment payments to workers who have lost their jobs. The Federal Unemployment Tax pays for any sort of unemployment that an individual draws on after losing their job, which helps prevent financially strapped taxpayers from ending up  in tax debt. It is required that an employer pays both a state and a federal-level Federal Unemployment Tax.

How Much Do I Owe?

In order to calculate the exact amount of Federal Unemployment Tax that you must pay, it is important to get in contact with your state’s tax Bureau. Another place where you can get information regarding your state’s personal Federal Unemployment Tax is by checking out IRS Form 940. Here, you will find a list of addresses and phone numbers pertaining to state employment agencies.

Insofar as the federal level of Federal Unemployment Tax is concerned, prior to July 1, 2011 the tax rate was at 6.2%. After June 30, 2011, the tax rate was decreased to 6.0%. This tax applies directly to the first $7000 that you paid to every single employee. Again, the $7000 wage base applies to the federal level of the Federal Unemployment Tax only. Your state’s rate may be different, and this is why it is important to do independent research on this matter.

 
 
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