FUTA

FUTA, the Federal Unemployment Tax Act, is a federal tax employers pay to fund unemployment programs. The rate is 6.0% on the first $7,000 of each employee's wages a year, less a credit of up to 5.4% for paying state unemployment tax, so most employers pay 0.6%, or $42 per employee.

Employees never pay FUTA; it is purely an employer payroll tax. In a credit reduction state the credit is smaller and the employer pays more. Some nonprofits and most government employers are exempt.

Employers file it once a year on Form 940 and deposit it during the year once the amount owed passes $500. The state side is SUTA. The payroll calculator includes FUTA in the cost of each employee.