![]() If states do not pay federal unemployment loans back by November 10 of the second consecutive year, FUTA tax credits are reduced by 0.3%. įUTA tax credits are reduced for employers in states that have outstanding federal unemployment loans from the Unemployment Trust Fund’s Federal Unemployment Account on January 1 for at least two consecutive years. An employer that receives the full 5.4% FUTA credit, therefore, pays 0.6% of the first $7,000 of an employee's wages, or $42, in FUTA tax per qualifying employee. Employers can receive an offset of up to 5.4% of their FUTA tax when they pay state unemployment taxes on time. While state tax amounts vary, the Federal Unemployment Tax Act (FUTA) tax is 6% of the federal unemployment tax wage base-the first $7,000 of an employee's wages-as of May 2023. STFAs are funded by state unemployment taxes and are used to pay regular unemployment benefits. Excesses from the EUCA flow into the Federal Unemployment Account, which loans funds to State Trust Fund Accounts (STFA). The excess funds not needed for the Administration account fund the Extended Unemployment Compensation Account (EUCA) to pay the federal half of extended benefits. The federal unemployment tax, or FUTA tax, is collected by the Internal Revenue Service (IRS) and transferred to the Unemployment Trust Fund (UTF).įUTA revenue funds the UTF's Employment Security Administration Account, which pays for federal and state unemployment insurance administration costs. The legality of FUTA was challenged and affirmed in Steward Machine Co. The Federal Unemployment Tax Act (FUTA), passed in 1939, created a federal unemployment tax to fund the joint federal-state unemployment insurance program. ![]() Employers also pay state unemployment taxes.Īs of February 2023, the FUTA tax rate was 6% of the first $7,000 in wages paid to each employee annually. FUTA requires employers to pay federal taxes to support the joint federal-state unemployment insurance program.
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