What is the FUTA tax rate and wage base for 2007?
The statutory tax rate is 6.2 percent of the employee’s wages, up to the 2008 FUTA wage base of $7,000. An employer typically only pays an effective rate of 0.8 percent because employers receive a 5.4 percent credit for the state unemployment taxes they pay or are treated as paying. Example 1: For an employee with no prior wages who earns $1,000 during the payroll period, there is no FUTA withholding since FUTA is an employer only tax. The FUTA tax equals $8.00 ($1,000 x 0.8%). Example 2: For an employee with 2007 year-to-date wages of $6,900 who earns $1,000 during the payroll period, this employee will reach the 2007 FUTA wage base during the period. Therfore the amount subject to FUTA is reduced from $1,000 to $100 ($7,000 minus $6,900 equals $100), resulting in an employer only FUTA tax of $0.80 ($100 x 0.8%). The general rule is that for any employee who earns more than $7,000 during the year, an employer will owe $56.00 ($7,000 x 0.8%) in FUTA.
