Why it matters
FUTA is an employer-only cost, so it does not appear in the employee's withholding. A payroll budget that leaves it out understates the cost of each employee, and the annual return has its own deadline.
Example
A client employs several people during the year. The payroll provider calculates FUTA on the wages subject to the tax, deposits the amount and files Form 940 with the annual federal returns.
Related terms
Questions about FUTA
Is FUTA the same as state unemployment tax?
No. FUTA is the federal unemployment tax. The state unemployment tax is separate, and the state rate and wage base can differ from the federal rules.
Who pays FUTA?
The employer pays FUTA. It is not withheld from the employee's wages, unlike the employee's share of FICA.