{"id":7532,"date":"2020-09-12T19:30:16","date_gmt":"2020-09-12T23:30:16","guid":{"rendered":"http:\/\/www.atyourbusiness.com\/blog\/?p=7532"},"modified":"2020-09-12T19:30:31","modified_gmt":"2020-09-12T23:30:31","slug":"futa-federal-unemployment-tax-act-in-plain-english","status":"publish","type":"post","link":"https:\/\/www.atyourbusiness.com\/blog\/futa-federal-unemployment-tax-act-in-plain-english\/","title":{"rendered":"FUTA (Federal Unemployment Tax Act): In Plain English"},"content":{"rendered":"\n<p>The average American contributed <a href=\"https:\/\/www.thebalance.com\/what-the-average-american-pays-in-taxes-4768594\">almost 30 percent of their income<\/a> to taxes in 2018.<\/p>\n\n\n\n<p>It&#8217;s hard enough to figure out how much money from your paycheck is going to the government. But if you&#8217;re a business owner, you have even more to consider. Namely, your corporate holdings will incur taxes, too.<\/p>\n\n\n\n<p>One major payment made by employers is the&nbsp;federal unemployment tax, or the FUTA.&nbsp;<\/p>\n\n\n\n\n\n<h2 class=\"wp-block-heading\">What is the FUTA?&nbsp;<\/h2>\n\n\n\n<p>The government charges you for its unemployment purse, which it uses to pay employees who use their jobs involuntarily. Some states may charge a similar fee.&nbsp;<\/p>\n\n\n\n<p>Employers have to pay into this tax themselves. In other words, they can&#8217;t deduct the FUTA from the amount they pay their employees.&nbsp;<\/p>\n\n\n\n<p>You&#8217;ll figure out your FUTA tax rate with the help of your <a href=\"https:\/\/silvertaxgroup.com\/irs-forms-940-and-941\/\">tax<\/a> forms, specifically Form 940, from the IRS.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Do&nbsp;I Know If I Owe FUTA?&nbsp;<\/h2>\n\n\n\n<p>Not all businesses have to pay into the FUTA. But you do if you meet either of these&nbsp;criteria:&nbsp;<\/p>\n\n\n\n<ul><li>You had at least one employee for at least part of a day in at least 20 weeks of the year.&nbsp;<\/li><li>You paid&nbsp;employees at least $1,500 in at least one quarter in the calendar year.<\/li><\/ul>\n\n\n\n<p>All types of employees count here: part-time, full-time and even temps. Wages to independent contractors or other types of non-employees won&#8217;t incur the FUTA.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How Do I Calculate FUTA?&nbsp;<\/h2>\n\n\n\n<p>Now that you know whether or not you&nbsp;have to pay&nbsp;the FUTA, it&#8217;s time to figure out the amount you owe.<\/p>\n\n\n\n<p>FUTA tax is simple \u2014 it&#8217;s a 6 percent tax on the first $7,000 of income you pay to each of your employees. In many cases, you can get a 5.4 percent credit from your state for what you pay them in unemployment tax. That means you only pay 0.6 percent to the federal government.&nbsp;<\/p>\n\n\n\n<p>Not all of what you pay to your employees count toward the FUTA, though. For example, reimbursing your staff for moving or providing them with life insurance benefits doesn&#8217;t factor into what you pay in FUTA taxes.&nbsp;<\/p>\n\n\n\n<p>Whatever you owe in FUTA, you&#8217;ll want to safeguard in a liability account until it&#8217;s time to pay.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">When Do I Pay FUTA?&nbsp;<\/h2>\n\n\n\n<p>Federal employer tax is slightly different than income tax. With the latter, you <a href=\"https:\/\/www.thebalance.com\/income-tax-deadlines-3192862\">typically pay on April 15th<\/a>, and that&#8217;s it.&nbsp;<\/p>\n\n\n\n<p>However, with FUTA, you have to pay a quarterly deposit if your FUTA payment has breached $500 in the designated three-month periods of the year.&nbsp;<\/p>\n\n\n\n<p>The first quarter extends from the start of the year through March 31st. Your FUTA deposit for this period will be due on April 30th.&nbsp;<\/p>\n\n\n\n<p>The second quarter lasts from April 1st until June 30th, with deposits due on July 31st. Then comes the third three-month stretch, from July 1st until September 30th. You&#8217;ll owe your deposit for this period on October 31st.&nbsp;<\/p>\n\n\n\n<p>The fourth FUTA quarter spans from October 1st until the end of the year. You&#8217;ll pay FUTA for that period by January 31st of the next year.&nbsp;<\/p>\n\n\n\n<p>Keep in mind that liability deposits accrue over periods. So, if you owe $300 in FUTA for the first period, you don&#8217;t need to pay a deposit. But if you owe another $300 by period two, you&#8217;ll have accrued $600 in FUTA to pay, meaning you owe a deposit.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">File&nbsp;the FUTA On Time<\/h2>\n\n\n\n<p>Finally, make sure you file your FUTA on time. It&#8217;s due on January 31st of the next calendar year. Your tax forms can help you get it done correctly and submit on time.&nbsp;<\/p>\n\n\n\n<p>Need more business advice? Check back with us for forms, articles and pre-written letters to keep you at the top of your game.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The average American contributed almost 30 percent of their income to taxes in 2018. It&#8217;s hard enough to figure out how much money from your paycheck is going to the government. But if you&#8217;re a business owner, you have even more to consider. Namely, your corporate holdings will incur taxes, too. One major payment made [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[26],"tags":[],"_links":{"self":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/7532"}],"collection":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/comments?post=7532"}],"version-history":[{"count":1,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/7532\/revisions"}],"predecessor-version":[{"id":7534,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/posts\/7532\/revisions\/7534"}],"wp:attachment":[{"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/media?parent=7532"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/categories?post=7532"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.atyourbusiness.com\/blog\/wp-json\/wp\/v2\/tags?post=7532"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}