What is Federal unemployment tax?
In short
Federal unemployment tax is paid only by employers, at 6.0% on the first $7,000 of each employee's wages a year, reported on Form 940. A credit of up to 5.4% for state unemployment taxes paid on time usually brings the net rate to 0.6%.
Key takeaways
- At the 0.6% net rate the tax is $42 per employee per year.
- Employers in states that haven't repaid federal loans get a reduced credit.
- Nothing is withheld from the employee's pay.
Where it's tested
REG: Employee Benefits & Payroll Tax — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
An employer has 10 employees, each earning more than $7,000 during the year. The employer is entitled to the full state unemployment tax credit. What is the employer's FUTA tax?