Getting Your Credit Out of FUTA

Welcome to the SurePayroll minute.

I’m Michael Alter.

You may have employees who filed for unemployment benefits. Or maybe you’ve filed for unemployment and received unemployment compensation yourself. Either way, if you’re out of a job, it’s nice to have at least a little financial stability while you look around for a new one.

Federal unemployment funding is made possible by the Federal Unemployment Tax Act, or FUTA. If you are a private, for-profit employer, you pay this federal tax by filing an annual Form 940 with the IRS.

FUTA works in conjunction with your state unemployment program, or SUTA. As an employer, you’re required to pay 6.2 percent of taxable wages per employee for the federal program, but you can take a credit of up to 5.4 percent for any state unemployment taxes you’ve paid on time.

The good news is there’s a limit to your FUTA contributions. You can stop paying FUTA for each employee once their wages exceed $7,000 annually.

For the simple answer to small business issues, I’m Michael Alter with your SurePayroll Minute.