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How Do You Figure the Amount of Deposit Required for FUTA

How Do You Figure the Amount of Deposit Required for FUTA

December 15, 1998
How do you figure the amount of deposit required for Form 940/940EZ, Employer's Annual Federal Unemployment Tax Return (FUTA)? Here’s an explanation from the IRS:

"First figure the amount of wages you paid during the quarter that are subject to federal unemployment tax. Only the first $7,000 paid to each employee during each calendar year is subject to the tax. Next, multiply the taxable wages you have just figured by eight tenths of one percent (.8%). If $100 or less, you do not have to make a deposit. Add this amount to the tax you figure for wages subject to unemployment tax at the end of the next quarter. If more than $100, a deposit is due. For more specific information, refer to Tax Topic 759, Form 940/940EZ—Deposit Requirements (available by calling the IRS at 800/829-1040 or through the IRS Web site at http://www.irs.ustreas.gov.

Note: The FUTA tax rate isn't always .8%. The FUTA tax rate is 6.2% (see next FAQ) Generally, an employer can take a credit against FUTA tax for amounts paid into state unemployment funds. This credit cannot be more than 5.4% (resulting in a net .8% rate). Most employers who make timely unemployment tax payments to the state are entitled to the .8%."

Source: Internal Revenue Service, November 25, 1998.