1. What is FUTA Tax?

The Federal Unemployment Tax Act (FUTA) is a payroll tax that provides funds for state workforce agencies. Employers pay this tax to fund unemployment compensation for workers who lose their jobs.

2. How FUTA Tax is Calculated

The FUTA tax is calculated as:

Where:

• Taxable wages — Total wages paid to employees during the year
• Wage base — Maximum amount of wages subject to FUTA tax per employee ($7,000 for 2023)
• 6% — Standard FUTA tax rate

Note: Many employers qualify for a 5.4% credit, effectively reducing their FUTA rate to 0.6%.

3. Current FUTA Wage Base

Details: The FUTA wage base is $7,000 per employee per year (as of 2023). Only the first $7,000 of each employee's wages are subject to FUTA tax.

4. Using the Calculator

Instructions: Enter the total taxable wages paid to employees and the current wage base (default is $7,000). The calculator will determine the FUTA tax liability.

5. Frequently Asked Questions (FAQ)

Q1: Who must pay FUTA tax?
A: Employers who pay wages of $1,500 or more in any calendar quarter or had at least one employee for some part of a day in any 20 different weeks.

Q2: What's the difference between FUTA and SUTA?
A: FUTA is federal unemployment tax, while SUTA (State Unemployment Tax Act) is state unemployment tax. Both fund unemployment benefits.

Q3: Can FUTA tax be deducted from employee wages?
A: No, FUTA is solely an employer tax. Employees do not contribute to FUTA.

Q4: When is FUTA tax due?
A: Generally due quarterly if liability is $500 or more. Annual filing may be allowed if total liability is less than $500.

Q5: Are there exemptions from FUTA tax?
A: Certain types of employment are exempt, including agricultural labor (in some cases), family employment, and some nonprofit organizations.