Finimpact

Frequently Asked Questions (FAQ)

What is the FUTA tax in brief?
The FUTA tax is a mandatory obligation on business owners with employees, who paid more than $1,500 in wages in a given quarter. These taxes go to a Federal fund to assist the unemployed.
What is the FUTA tax rate?
The FUTA tax rate is 6% as a default on the first $7,000 earned by an employee. However, there are significant tax deductions available down to 0.6%.
How do I avoid paying this tax?
There are no ways to avoid paying this tax unless you do not have any employees or you are an exempt entity as described under the IRS Form 940 guidelines. You can greatly reduce FUTA by paying your SUTA obligations on time or by using independent contractors.
What payments are exempt from FUTA tax?
Life insurance, retirement contributions, fringe benefits, and dependent care payments are exempt from FUTA calculations.
When is FUTA tax due?
The FUTA tax deposit is due on the last day of each quarter (March, June, September, December) where the total obligations exceed $500. Whenever the FUTA obligation exceeds $500, a FUTA deposit is due on the last day of that quarter.
What is additional Medicare withholding?
Employees that earn more than $200,000 are subject to an additional 0.9% tax on top of the 1.45%. This additional tax is withheld by the employer for payment.

About the Author

Daniel Lewis

Daniel Lewis

MBA accredited investment professional

Daniel Lewis is an MBA accredited investment professional who wants to assist small business owners to gain access to finance. After going through many channels for funding, Lewis has found that getting the first loan right is vitally important for future success.

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