Form 940 FUTA Tax Calculator

FUTA Tax Formula:

\[ FUTA\ Tax = \min(Taxable\ Wages, Wage\ Base) \times 0.06 \]

FUTA Tax:

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1. What is Form 940 FUTA Tax?

The Federal Unemployment Tax Act (FUTA) tax is a payroll tax paid by employers to fund unemployment benefits. Form 940 is used to report and pay this tax annually. The tax is 6% of the first $7,000 paid to each employee (wage base), though most employers receive a credit of up to 5.4% for state unemployment taxes paid.

2. How Does the Calculator Work?

The calculator uses the FUTA tax formula:

\[ FUTA\ Tax = \min(Taxable\ Wages, Wage\ Base) \times 0.06 \]

Where:

$ Taxable\ Wages $ — Total wages subject to FUTA tax
$ Wage\ Base $ — Maximum wages per employee subject to FUTA tax ($7,000 for 2023)
$ 0.06 $ — FUTA tax rate (6%)

Explanation: The calculation applies the 6% tax rate only to the first $7,000 (or other specified wage base) paid to each employee during the calendar year.

3. Importance of FUTA Tax Calculation

Details: Accurate FUTA tax calculation ensures compliance with federal unemployment tax requirements and helps businesses budget for employment taxes. It's essential for completing Form 940 correctly and avoiding penalties.

4. Using the Calculator

Tips: Enter total taxable wages and the wage base (default is $7,000). The calculator will determine the FUTA tax owed at the 6% rate. Remember to account for any state unemployment tax credits when filing.

5. Frequently Asked Questions (FAQ)

Q1: What is the current FUTA wage base?
A: For 2023, the wage base is $7,000 per employee. Only the first $7,000 of each employee's wages are subject to FUTA tax.

Q2: Can the FUTA tax rate change?
A: While the statutory rate is 6%, the effective rate is often 0.6% after the maximum 5.4% credit for state unemployment taxes paid.

Q3: Who must file Form 940?
A: Employers who paid $1,500 or more in wages during any calendar quarter or had at least one employee for 20 weeks in a calendar year.

Q4: Are there state unemployment taxes too?
A: Yes, most states have their own unemployment tax (SUTA) with different rates and wage bases. These often qualify for the FUTA credit.

Q5: When is Form 940 due?
A: The form is due January 31 of the following year, with quarterly deposits required if the accumulated tax exceeds $500.