Publication 15 |
2000 Tax Year |
Chapter 14 Federal Unemployment (FUTA) Tax
The Federal Unemployment Tax Act (FUTA), with state unemployment
systems, provides for payments of unemployment compensation to workers
who have lost their jobs. Most employers pay both a Federal and a
state unemployment tax. A list of state unemployment tax agencies,
including addresses and phone numbers, is available in Pub. 926,
Household Employer's Tax Guide. Only the employer pays FUTA tax;
it is not deducted from the employee's wages. For more information,
see the Instructions for Form 940.
Use the following three tests to determine whether you must pay
FUTA tax. Each test applies to a different category of employee, and
each is independent of the others. If a test describes your situation,
you are subject to FUTA tax on the wages you pay to employees in that
category during the current calendar year.
- General test.
You are subject to FUTA tax in 2001 on the wages you pay employees
who are not farmworkers or household workers if in the current or
preceding calendar year:
- You paid wages of $1,500 or more in any calendar quarter in
2000 or 2001 or
- You had one or more employees for at least some part of a
day in any 20 or more different weeks in 2000 or 20 or more different
weeks in 2001.
- Household employees test.
You are subject to FUTA tax only if you paid total cash wages of
$1,000 or more (for all household employees) in any calendar quarter
in 2000 or 2001. A household worker is an employee who performs
household work in a private home, local college club, or local
fraternity or sorority chapter.
- Farmworkers test.
You are subject to FUTA tax on the wages you pay to farmworkers if:
- You paid cash wages of $20,000 or more to farmworkers during
any calendar quarter in 2000 or 2001 or
- You employed 10 or more farmworkers during at least some
part of a day (whether or not at the same time) during any 20 or more
different weeks in 2000 or 20 or more different weeks in 2001.
Computing FUTA tax.
For 2000 and 2001, the FUTA tax rate is 6.2%. The tax applies to
the first $7,000 you pay each employee as wages during the year. The
$7,000 is the Federal wage base. Your state wage base may be
different. Generally, you can take a credit against your FUTA tax for
amounts you paid into state unemployment funds. This credit cannot be
more than 5.4% of taxable wages. If you are entitled to the maximum
5.4% credit, the FUTA tax rate after the credit is .8%.
Successor employer.
If you acquired a business from an employer who was liable for FUTA
tax, you may be able to count the wages that employer paid to the
employees who continue to work for you when you figure the $7,000 FUTA
wage base. See the Instructions for Form 940.
Depositing FUTA tax.
For deposit purposes, figure FUTA tax quarterly. Determine your
FUTA tax liability by multiplying the amount of wages paid during the
quarter by .008 (.8%). Stop depositing FUTA tax on an employee's wages
when he or she reaches $7,000 in wages for the calendar year. If any
part of the wages subject to FUTA are exempt from state unemployment
tax, you may have to deposit more than the tax using the .008 rate.
For example, in certain states, wages paid to corporate officers,
certain payments of sick pay by unions, and certain fringe benefits,
are exempt from state unemployment tax.
If your FUTA tax liability for a quarter is $100 or less, you do
not have to deposit the tax. Instead, you may carry it forward and add
it to the liability figured in the next quarter to see if you must
make a deposit. If your FUTA tax liability for any calendar quarter in
2001 is over $100 (including any FUTA tax carried forward from an
earlier quarter), you must deposit the tax by electronic funds
transfer (EFTPS) or in an authorized financial institution using
Form 8109, Federal Tax Deposit Coupon. See section 11 for
information on these two deposit methods.
Note:
You are not required to deposit FUTA taxes for household
employees unless you report their wages on Form 941 or 943. See
Pub. 926, Household Employer's Tax Guide, for more
information.
When to deposit.
Deposit the FUTA tax by the last day of the first month after the
quarter ends.
If your liability for the fourth quarter (plus any undeposited
amount from any earlier quarter) is over $100, deposit the entire
amount by the due date of Form 940 or Form 940-EZ (January 31). If it
is $100 or less, you can either make a deposit or pay the tax with
your Form 940 or 940-EZ by January 31.
When To Deposit FUTA Taxes
Reporting FUTA tax.
Use Form 940 or 940-EZ, Employer's Annual
Federal Unemployment (FUTA) Tax Return, to report this tax. The IRS
will mail a preaddressed Form 940 or 940-EZ to you if you filed a
return the year before. If you do not receive Form 940 or 940-EZ, you
can get the form by calling 1-800-TAX-FORM (1-800-829-3676).
Form 940-EZ requirements.
You may be able to use Form 940-EZ instead of Form 940 if (1) you
paid unemployment taxes ("contributions") to only one state, (2)
you paid state unemployment taxes by the due date of Form 940 or
940-EZ, and (3) all wages that were taxable for FUTA tax purposes were
also taxable for your state's unemployment tax. For example, if you
paid wages to corporate officers (these wages are subject to FUTA tax)
in a state that exempts these wages from its unemployment taxes, you
cannot use Form 940-EZ.
Household employees.
If you did not report employment taxes for household employees on
Form 941 or 943, report FUTA tax for these employees on Schedule
H (Form 1040), Household Employment Taxes. See Pub. 926 for more
information.
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