What is the FUTA tax?
The Federal Unemployment Tax is, for some employers, a required rate included as part of its employee labor burden. The employee does not share this burden with the employer.Federal Unemployment TaxThe Federal Unemployment Tax is a tax under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs.Federal Unemployement Tax Act (FUTA)FUTA was passed in 1939 to support a secure national employment system whereby employers, through a Federal Unemployment Tax, would pay the costs of administering an unemployment compensation and national job placement system.Who Pays This TaxThere are three independent tests relative to three different employee categories. An employer operating under any of these test situations would be subject to FUTA tax on employee wages. The tests are described as (1) the General test, (2) the Household Employees test, and (3) the Farmworkers test.Computing FUTA TaxThe FUTA tax rate is 6.2 percent of the first $7,000 (
