1. What is FUTA Tax?

The Federal Unemployment Tax Act (FUTA) is a payroll tax paid by employers to fund state workforce agencies. It provides unemployment compensation to workers who lose their jobs.

2. How FUTA Tax is Calculated

The standard FUTA calculation formula:

Where:

• Taxable Wages — Total wages paid to employees during the year
• Wage Base — Maximum amount subject to FUTA tax ($7,000 in 2024)
• 0.06 — Standard FUTA tax rate (6%)

Explanation: The tax is calculated on the first $7,000 paid to each employee annually. After an employee earns $7,000, no further FUTA tax is owed for that employee.

3. 2024 FUTA Tax Rate and Wage Base

Details: For 2024, the FUTA tax rate is 6% on the first $7,000 paid to each employee. Most employers receive a 5.4% credit, making the effective rate 0.6%.

4. Using the Calculator

Tips: Enter total taxable wages paid to employees and the current wage base (defaults to $7,000 for 2024). The calculator will determine the FUTA tax owed.

5. Frequently Asked Questions (FAQ)

Q1: Who pays FUTA tax?
A: Employers pay FUTA tax; it is not deducted from employee wages. Sole proprietors and partners are generally exempt.

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

Q3: Can I get a credit against FUTA tax?
A: Yes, up to 5.4% credit is available if you pay state unemployment taxes on time, making the effective rate 0.6%.

Q4: When is FUTA tax due?
A: Quarterly if liability is $500 or more. Form 940 is filed annually by January 31.

Q5: Are all wages subject to FUTA?
A: No, certain payments like fringe benefits, dependent care, and retirement contributions may be exempt.