Q:

What is the Federal Unemployment Tax Act (FUTA)?

A:

Quick Answer

The Federal Unemployment Tax Act provides payments of unemployment compensation to workers who have lost their job, according to the IRS. Under the Act, employers pay both a federal and state unemployment tax; they are not deducted from employee wages.

Continue Reading

Full Answer

FUTA covers a federal share of state administration costs for job service and unemployment insurance programs and pays one-half of extended unemployment benefit costs. Federal unemployment taxes are owed by employers who pay at least $1,500 in wages during any calendar quarter, cites Intuit. As of January 2015, the current FUTA rate is 6.0 percent; employers may take a credit up to 5.4 percent of taxable income if they pay state unemployment taxes.

Learn more about Taxes

Related Questions

Explore