1. What is FUTA Tax?

The Federal Unemployment Tax Act (FUTA) is a payroll tax that provides funds for state unemployment agencies. Employers pay this tax, not employees. The tax applies to the first $7,000 paid to each employee annually (for 2023).

2. How FUTA Tax is Calculated

The calculator uses the FUTA formula:

Where:

• \( taxable\ wages \) — Total wages subject to FUTA tax
• \( wage\ base \) — Maximum taxable amount per employee ($7,000 for 2023)
• \( 6\% \) — Federal FUTA tax rate

Explanation: The tax is calculated on the first $7,000 of each employee's wages each year. If wages exceed $7,000, only $7,000 is taxed.

3. FUTA Tax Rate and Wage Base

Details: The standard FUTA tax rate is 6% of the first $7,000 paid to each employee annually. However, employers who pay state unemployment taxes may qualify for a credit of up to 5.4%, reducing the effective FUTA rate to 0.6%.

4. Using the Calculator

Tips: Enter total taxable wages and the wage base (default is $7,000 for 2023). The calculator will determine the FUTA tax liability.

5. Frequently Asked Questions (FAQ)

Q1: Who pays FUTA tax?
A: Employers pay FUTA tax, not employees. It's calculated on wages paid to employees.

Q2: What's the 2023 FUTA wage base?
A: The 2023 wage base is $7,000 per employee. Only the first $7,000 of each employee's wages are subject to FUTA tax.

Q3: Can the FUTA rate change?
A: The federal FUTA rate is 6%, but employers may qualify for a credit up to 5.4% if they pay state unemployment taxes on time.

Q4: When is FUTA tax due?
A: FUTA tax is typically filed quarterly using Form 940, with payments due by the last day of the month following each quarter.

Q5: Are all wages subject to FUTA?
A: Most wages are subject, but there are exceptions like certain fringe benefits, dependent care benefits, and wages paid to family members.