Federal Unemployment Tax Act

Federal Unemployment Tax Act

The Federal Unemployment Tax Act (or FUTA, usc-title-chap|26|23) is a United States federal law that imposes a federal employer tax used to fund state workforce agencies. Employers report this tax by filing an annual Form 940 with the Internal Revenue Service. In some cases, the employer is required to pay the tax in installments during the tax year.

FUTA covers the costs of administering the unemployment insurance (UI) and job service programs in all states. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits.

For years through December 31, 2008, the FUTA imposes a 6.2% tax on the employer for the first $7,000 of gross earnings of each worker per year, with the rate changing to 6.0% for compensation paid during 2009 and later years. [See usc|26|3301. Note: As of mid April 2008, the text of the statute in the linked material at the Legal Information Institute at Cornell University Law School has not yet been updated to reflect amendments to the Internal Revenue Code made by paragraphs (1) and (2) of subsection (a) of section 1501 of the Energy Independence and Security Act of 2007, Pub. L. No. 110-140 (Dec. 19, 2007), which makes the 6.2% rate applicable to 2008 compensation with the 6.0% rate applicable beginning in 2009.] Once the worker's earnings reach $7,000 during a given year, the employer no longer pays any Federal unemployment tax for that year with respect to that worker. Certain credits are allowed with respect to state unemployment taxes paid that may reduce the effective rate to 0.8%.


See also

* Surtax

External links

* [http://www.irs.gov/pub/irs-pdf/f940.pdf Printable FUTA form 940 from IRS.gov]

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Federal Unemployment Tax Act — (FUTA) Legislation which requires employers to contribute to a fund that pays unemployment insurance benefits. Category: Business, LLCs & Corporations → Business Accounting, Bookkeeping & Finances Category: Business Cash Flow Problems &… …   Law dictionary

  • Federal Unemployment Tax Act - FUTA — The original legislation that allows the federal government to tax businesses with employees for the purpose of collecting revenue that is then allocated to state unemployment agencies and paid to unemployed workers who are eligible to claim… …   Investment dictionary

  • Unemployment benefits — are payments made by governments to unemployed people. It may be based on a compulsory para governmental insurance system. Depending on the jurisdiction and the status of the person, those sums may be meager, covering only basic needs (thus a… …   Wikipedia

  • Tax — Taxation An aspect of fiscal policy …   Wikipedia

  • tax — A charge by the government on the income of an individual, corporation, or trust, as well as the value of an estate or gift. The objective in assessing the tax is to generate revenue to be used for the needs of the public. A pecuniary burden laid …   Black's law dictionary

  • Tax Equity and Fiscal Responsibility Act of 1982 — The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA), a United States federal law, rescinded some of the effects of the Economic Recovery Tax Act (ERTA, colloquially known as the Kemp Roth Tax Cut) passed the year before.The scheduled… …   Wikipedia

  • Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 — Effective (Various dates for different provisions) Citations Public Law Public Law 111 312 Stat …   Wikipedia

  • Federal Reserve System — FRB and FED redirect here. For other uses, see FRB (disambiguation) and FED (disambiguation). Federal Reserve System …   Wikipedia

  • Unemployment — World unemployment rates[1] as of January 2009[update] Unemployment (or …   Wikipedia

  • Tax credit — The term tax credit describes two different concepts:*The first is a recognition of partial payment already made towards taxes due. *The second is a state benefit paid to employees through the tax system, which has the effect of increasing… …   Wikipedia