How To Calculate FUTA Taxes
The Federal Unemployment Tax Act (FUTA) is a kind of tax imposed by US Federal Law to back the state funded agencies. To file this tax, employees use Form 940 of the Internal Revenue Service. The conditions of the payment of tax may vary from case to case as some are allowed to pay monthly instalments while others need to pay in full.
FUTA plays a considerable role in covering the costs of Unemployment Insurance (UI) while it caters half of the cost of unemployment benefits. Unlike the income tax, which is deducted from the salary of the employee, FUTA tax is not deducted from his pay check. Instead, it is the responsibility of the employee to pay the tax. FUTA tax is linked with the State Unemployment Tax Act (SUTA); therefore the latter is a must to calculate in order to pay the former, FUTA tax. Both taxes are of mandatory importance, as otherwise you will lose your tax credit. Therefore, you need to be certain that you have paid both taxes.
Instructions
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1
Visit the IRS website and gather all the information regarding both taxes. You can also take help from you state agency. At the website, you will have to access the IRS Publication 15 that will provide you all the necessary information you need regarding FUTA and other Federal taxes.
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2
After you have downloaded the form, contact your state’s Department of Revenue to obtain the instructions and SUTA form.
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3
When have both forms in hand, you must calculate the gross wages of your employee, remembering that FUTA taxes are applicable on a person having a minimum annual salary of USD7000. Do not include the expenses incurred by your business but you must mention the bonuses, tips and commission earned by the employee.
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4
You should estimate FUTA tax of the employee. Remember that, a percentage of 6.2 is levied on a person earning $7000 per annum.
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Now is the right time to calculate your SUTA taxes. Note that the SUTA tax bar varies from state to state. Therefore, you should be certain about the tax percentage applicable in your state.
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6
At this moment, you should multiply the taxable amount by 5.4 percent, which is the maximum limit of availing a tax credit.
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Now, you should calculate your net FUTA tax. To calculate this, you will have to subtract your SUTA tax amount from the base FUTA tax and the result will be your net FUTA tax.
 is a kind of tax imposed by US Federal Law to back the state funded agencies. To file this tax, employees use Form 940 of the Internal Revenue Service. The conditions of the payment of tax may vary from case to case as some are allowed to pay monthly instalments while others need to pay in full.
FUTA plays a considerable role in covering the costs of Unemployment Insurance (UI) while it caters half of the cost of unemployment benefits. Unlike the income tax, which is deducted from the salary of the employee, FUTA tax is not deducted from his pay check. Instead, it is the responsibility of the employee to pay the tax. FUTA tax is linked with the State Unemployment Tax Act (SUTA); therefore the latter is a must to calculate in order to pay the former, FUTA tax. Both taxes are of mandatory importance, as otherwise you will lose your tax credit. Therefore, you need to be certain that you have paid both taxes.Next%20stop%3A%20Pinterest "Pin It")
