The Federal Unemployment Tax Act (FUTA)

• Date: May 26, 2011
• Source: http://www.irs.gov/

The Federal Unemployment Tax Act (FUTA) provides for cooperation between state and federal governments in the establishment and administration of unemployment insurance. Under this dual system, the employer is subject to a payroll tax levied by the federal and state governments. The taxpayer is allowed a maximum credit of 5.4% against the Federal tax of 6.2%, provided that all payments were made to the state by the due date. Employers whose payments are received by the state after the due date are allowed 90% of the credit that would have been allowed had the payments been made on time. The FUTA Certification program is the method IRS uses to verify with the states that the credit claimed on the Form 940 and/or Schedule H was actually paid into the state’s unemployment funds. There are currently 53 participating agencies which encompass the 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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