Federal unemployment tax act (FUTA)

The federal unemployment tax act (FUTA) tax provides payments of unemployment compensation to workers who have lost their jobs. It's an employer-only paid tax. Gusto accurately calculates and withholds the FUTA tax amount throughout your payrolls, unless your company is exempt from this tax.

The FUTA tax rate is 6%, which taxes wages up to the first $7,000 earned by the employee. This totals to $420 in annual FUTA tax amount for each employee.

However, employers generally receive a credit of 5.4% for paying timely state unemployment taxes. This results in a reduced FUTA tax rate of 0.6%, which totals to $42 in annual FUTA tax amount for each employee.

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