FUTA Tax Calculator
Your Estimated FUTA Tax Due
Understanding FUTA Tax
The Federal Unemployment Tax Act (FUTA) imposes a tax on employers. This tax funds federal and state unemployment compensation programs. Generally, employers are required to pay FUTA tax on wages paid to employees. The standard FUTA tax rate is 6.0% on the first $7,000 of wages paid to each employee during the calendar year. However, most employers receive a credit of up to 5.4% for taxes paid to state unemployment compensation funds, resulting in a net FUTA tax rate of 0.6% for those employers.
Key Concepts:
- Wage Base: The maximum amount of wages subject to FUTA tax per employee per year ($7,000).
- Standard FUTA Rate: 6.0%.
- FUTA Credit: Up to 5.4% credit is typically available for state unemployment taxes paid.
- Net FUTA Rate: 0.6% (6.0% – 5.4%) for employers who pay state unemployment taxes on time.
- FUTA Forms: Employers typically file Form 941 (Employer's QUARTERLY Federal Tax Return) to report FUTA tax liability, and Form 940 (Employer's Annual Federal Unemployment (FUTA) Tax Return) annually.
This calculator provides an *estimate* of your quarterly FUTA tax liability. It considers the total taxable wages paid to employees during the quarter, the number of employees, and the potential FUTA credit you might receive. Remember that FUTA tax is an annual tax, and the wage base of $7,000 applies per employee per calendar year. This calculator assumes that the wages entered are within the annual wage base for the current year for simplicity in a quarterly estimate.
How the Calculation Works:
1. Identify Taxable Wages: The calculator takes the 'Total Taxable Wages Paid This Quarter'. It's important to ensure these wages are within the $7,000 annual limit per employee. 2. Determine FUTA Tax Rate: The base FUTA rate is 6.0%. If a FUTA credit (expressed as a percentage, typically 5.4%) is entered, the net FUTA rate is calculated as (6.0% – FUTA Credit %). 3. Calculate FUTA Tax: The estimated FUTA tax due is calculated by multiplying the 'Total Taxable Wages Paid This Quarter' by the net FUTA rate.
Formula:
Net FUTA Rate (%) = 6.0% - FUTA Credit (%)
Estimated FUTA Tax Due = Total Taxable Wages Paid This Quarter * (Net FUTA Rate / 100)
*Note: This calculator is for estimation purposes only. Consult with a tax professional or refer to IRS guidelines for precise tax obligations.*