1. What is FUTA Liability?

FUTA (Federal Unemployment Tax Act) liability is the tax employers pay to fund state workforce agencies. The tax applies to the first $7,000 paid to each employee annually at a rate of 6%.

2. How Does the Calculator Work?

The calculator uses the FUTA liability formula:

Where:

• \( \text{Taxable Wages} \) — Wages subject to FUTA tax
• \( \text{Wage Base} \) — Maximum wages subject to FUTA per employee (typically $7,000)
• \( 0.06 \) — FUTA tax rate (6%)

Explanation: The calculation applies the 6% tax rate to the lesser of the employee's taxable wages or the wage base.

3. Importance of FUTA Calculation

Details: Accurate FUTA calculation ensures proper tax payments and compliance with federal regulations. Employers can receive up to 5.4% credit for state unemployment taxes paid.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: What is the current FUTA wage base?
A: The federal wage base is $7,000 per employee per year, though some states may have different wage bases.

Q2: Can the FUTA tax rate change?
A: While the standard rate is 6%, the effective rate after state tax credits is typically 0.6%. Rates may change due to credit reductions.

Q3: Who pays FUTA tax?
A: Employers pay FUTA tax; it is not deducted from employee wages.

Q4: Are all wages subject to FUTA?
A: No, certain payments like fringe benefits may be exempt. Consult IRS guidelines for specifics.

Q5: When is FUTA tax due?
A: Generally due by January 31 following the tax year, with quarterly deposits required if liability exceeds $500.