Federal Unemployment Tax Act (FUTA)

The Federal Unemployment Tax Act (FUTA) is a federal law that requires employers to pay a tax to help fund state unemployment insurance programs. The tax is based on the amount of wages an employer pays to employees.

The FUTA tax is used to pay for benefits to unemployed workers who have lost their jobs through no fault of their own. The benefits help workers pay for food, housing, and other expenses while they are looking for a new job.

The FUTA tax is also used to help states administer their unemployment insurance programs. The states use the money to pay for things like staff, office space, and computer systems.

The FUTA tax is a shared responsibility between employers and employees. Employers pay 6% of the first $7,000 of wages they pay to each employee. Employees pay 0.6% of their wages.

The FUTA tax is collected by the Internal Revenue Service (IRS). Employers must file an annual return with the IRS to report the amount of FUTA taxes they have withheld from their employees' wages.

The FUTA tax is a necessary part of the unemployment insurance system. It helps to ensure that unemployed workers have the financial support they need to get back on their feet.