What is FUTA tax?
The Federal Unemployment Tax Act (FUTA), also known as the unemployment tax, is an employer-paid payroll tax that funds unemployment benefits. FUTA requires employers to file a FUTA tax form, Form 940, in the first quarter of the year along with paying any FUTA taxes owed.
The federal unemployment account offers temporary compensation to workers who lose their jobs. Unlike income and FICA taxes, FUTA is not deducted from employee wages. Employers pay FUTA taxes on up to $7,000 of each of their employees’ annual pay. No FUTA tax is assessed on an individual employee’s wages in excess of $7,000.
Learn more about FUTA and other payroll taxes.
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Payroll Definition