Q:
|
Who is subject to Federal Unemployment Tax?
|
A:
|
Most employers pay both a federal and a state unemployment tax. Please note, only the employer pays FUTA tax, and it isn't withheld from the employee's wages.
Generally, you’re subject to FUTA tax in 2020 on the wages you pay employees who aren't farmworkers or household workers if you meet any one of the following situations:
-
You paid wages of $1,500 or more in any calendar quarter in 2019 or 2020, or
-
You had one or more employees for at least some part of a day in any 20 or more different weeks in 2019 or 20 or more different weeks in 2020.
|
Q:
|
What is FUTA tax rate and the wage base?
|
A:
|
For 2020, the FUTA tax rate is 6.0%. The tax applies to the first $7,000 you pay to each employee as wages during the year. The $7,000 is the federal wage base. Your state wage base may be different.
|
Q:
|
Are the wages subject to state unemployment tax same as the wages subject to FUTA tax?
|
A:
|
Depends on the state. In some states, the wages subject to state unemployment tax are the same as the wages subject to FUTA tax. However, certain states exclude some types of wages from state unemployment tax, even though they’re subject to FUTA tax (for example, certain payments of sick pay by unions, and certain fringe benefits). In such a case, you may be required to deposit more than 0.6% FUTA tax on those wages.
|
Q:
|
Any credit available for FUTA tax?
|
A:
|
Generally, you can take a credit against your FUTA tax for amounts you paid into state unemployment funds. The credit may be as much as 5.4% of FUTA taxable wages. If you’re entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%. You’re entitled to the maximum credit if you paid your state unemployment taxes in full, on time, and on all the same wages as are subject to FUTA tax, and as long as the state isn't determined to be a credit reduction state.
|
FAQ
