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File your taxes on timeĪs with almost all taxes, you may face a penalty if you file your FUTA taxes late. Here are five tips for minimizing both your federal and state unemployment tax obligations. That said, there are steps you can take to potentially lessen your FUTA tax burden too. That’s why, if you want to minimize your unemployment tax burden, you may be more successful if you focus on keeping your SUTA taxes low. For starters, SUTA rates and wage caps differ by state, and perhaps more importantly, many states will vary these rates over the course of the year depending on your business practices. While the federal unemployment tax rate is constant, SUTA tax rates and wage caps vary in many ways. Six percent of $56,000 is $3,360, an amount significantly less than if you took six percent of the cumulative hundreds of thousands of dollars you pay your employees annually.įour ways to minimize your unemployment tax burden

For example, if you have eight employees and you pay all of them at least $45,000 per year, you only need to pay the FUTA tax rate on $56,000 total – eight employees multiplied by the $7,000 FUTA cap).

Under FUTA, f ederal unemployment tax rates are six percent taken on each of your employees’ first $7,000 in wages. What are the federal unemployment tax rates? Visit your state’s Department of Labor website, or speak with an accountant to know for sure. There may be slight variations on these rules by state. Your company employed at least one employee on any day of any week for at least 20 weeks, consecutive or nonconsecutive, during the calendar year.Your company paid at least $1,500 in wages to employees during any quarter of the calendar year.In most cases, if your company meets one of the two below criteria, you must pay FUTA and SUTA taxes: Who has to pay FUTA and SUTA taxes?Īlthough FUTA and SUTA are different, and each state’s SUTA regulations and tax rates vary, the criteria that determine whether a company must pay FUTA and SUTA taxes are mostly the same. As with almost all state regulations, the rules that company owners must follow for SUTA vary by state. Just as FUTA taxes fund federal unemployment programs, SUTA taxes fund your state’s unemployment insurance program. The SUTA tax is the state version of the FUTA tax. Without FUTA taxes, the federal government would be largely unable to fund its unemployment program, which provides financial assistance to people who have lost their jobs through no fault of their own, meaning they were not fired or quit. The FUTA tax is a tax that companies pay toward federal unemployment insurance. Read this guide to learn all about FUTA, SUTA, and your obligations for each.

The provisions for paying these taxes are based on two distinct but interrelated regulations: the Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA). In all likelihood, your company has to pay unemployment taxes to both the federal government and your state’s government. There are two other tax categories that your company pays for entirely: unemployment taxes.