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The Federal Unemployment Tax Act (or FUTA), is a United States federal law that imposes a federal employer tax used to fund state workforce agencies. The information on the percentage and limits is on the IRS website; in the Publication 15 (Circular E) Employer’s Tax Guide; on our website; or you may check with your accountant.
Each year the rates must be updated in the Profits Plus Payroll (Module 1), System Management (Task 32), Update P/R Execution Parameters.
FUTA is an employer only tax. The percent paid is NOT paid by the employee, or withheld from the employees pay. Usually there is a FUTA maximum. If the FUTA maximum is $7,000.00, when the employee’s earnings reach $7,000.00, the employer no longer pays the FUTA tax. The percentage and maximum need to be verified and updated each year.
FUTA – the percent and maximum limit isn’t affected by number of dependants claimed by the employee.
At the end of each Quarter the employer will need to deposit/pay the funds for the FUTA taxes. The employer’s report the FUTA tax by filing an annual Form 940 with the IRS
The amount of the Quarterly employer FUTA payments must be either vouchered into the Accounts Payable module or a manual journal entry may be posted into the general ledger module. This isn’t automatically done through the payroll module.
The report on Profits Plus needed for this is in the Payroll Module, Tax reports/forms (Task 10), Quarterly 941 / Monthly tax summary PRHSUM (Sub-task 1).
Check with your accountant to be sure all reporting and payments are done correctly and on a timely basis.
Also, check with your STATE authority or accountant on any State unemployment payroll tax forms and payments needed.
Employers report this tax by filing an annual Form 940 with the Internal Revenue Service. In some cases, the employer is required to pay the tax in installments during the tax year.
FUTA covers the costs of administering the unemployment insurance (UI) and job service programs in all states. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits.