14. Federal Unemployment (FUTA) Tax The Federal Unemployment Tax Act (FUTA), with state unemploymentsystems, provides for payments of unemployment compensation to workerswho have lost their jobs. Most employers pay both a Federal and astate 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 payFUTA tax. Each test applies to a different category of employee, andeach 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 thatcategory during the current calendar year. General test. You are subject to FUTA tax on the wages you pay employees who arenot farmworkers or household workers if in the current or precedingcalendar year: You paid wages of $1,500 or more in any calendar quarter in1999 or 2000 or You had one or more employees for at least some part of aday in any 20 or more different weeks in 1999 or 20 or more differentweeks in 2000. 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 quarterin 1999 or 2000. A household worker is an employee who performshousehold work in a private home, local college club, or localfraternity 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 duringany calendar quarter in 1999 or 2000 or You employed 10 or more farmworkers during at least somepart of a day (whether or not at the same time) during any 20 or moredifferent weeks in 1999 or 20 or more different weeks in 2000. Computing FUTA tax.For 1999 and 2000, the FUTA tax rate is 6.2%. The tax applies tothe 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 bedifferent. Generally, you can take a credit against your FUTA tax foramounts you paid into state unemployment funds. This credit cannot bemore than 5.4% of taxable wages. If you are entitled to the maximum5.4% credit, the FUTA tax rate after the credit is .8%. Successor employer.If you acquired a business from an employer who was liable for FUTAtax, you may be able to count the wages that employer paid to theemployees who continue to work for you when you figure the $7,000 FUTAwage base. See the Instructions for Form 940. Depositing FUTA tax.For deposit purposes, figure FUTA tax quarterly. Determine yourFUTA tax liability by multiplying the amount of wages paid during thequarter by .008 (.8%). Stop depositing FUTA tax on an employee's wageswhen he or she reaches $7,000 in wages for the calendar year. If anypart of the wages subject to FUTA are exempt from state unemploymenttax, 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 donot have to deposit the tax. Instead, you may carry it forward and addit to the liability figured in the next quarter to see if you mustmake a deposit. If your FUTA tax liability for any calendar quarter in2000 is over $100 (including any FUTA tax carried forward from anearlier quarter), you must deposit the tax by electronic fundstransfer (EFTPS) or in an authorized financial institution usingForm 8109, cheap hotels in MontpellierFederal Tax Deposit Coupon. See section 11 forinformation on these two deposit methods. Note:You are not required to deposit FUTA taxes for householdemployees unless you report their wages on Form 941 or 943. SeePub. 926, Household Employer's Tax Guide, for moreinformation. When to deposit.Deposit the FUTA tax by the last day of the first month after thequarter ends. If your liability for the fourth quarter (plus any undepositedamount from any earlier quarter) is over $100, deposit the entireamount by the due date of Form 940 or Form 940-EZ (January 31). If itis $100 or less, you can either make a deposit or pay the tax withyour Form 940 or 940-EZ by January 31. When To Deposit FUTA Taxes Reporting FUTA tax.Use Form 940 or 940-EZ, Employer's AnnualFederal Unemployment (FUTA) Tax Return, to report this tax. The IRSwill mail a preaddressed Form 940 or 940-EZ to you if you filed areturn the year before. If you do not receive Form 940 or 940-EZ, youcan 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) youpaid unemployment taxes ("contributions") to only one state, (2)you paid state unemployment taxes by the due date of Form 940 or940-EZ, and (3) all wages that were taxable for FUTA tax purposes werealso taxable for your state's unemployment tax. For example, if youpaid wages to corporate officers (these wages are subject to FUTA tax)in a state that exempts these wages from its unemployment taxes, youcannot use Form 940-EZ. Household employees.If you did not report employment taxes for household employees onForm 941 or 943, report FUTA tax for these employees on ScheduleH (Form 1040), Household Employment Taxes. See Pub. 926 for moreinformation. Special Rules Chart - 1 Special Rules Chart - 2 Special Rules Chart - 3 Special Rules Chart - 4