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What is Federal Unemployment Tax Act (FUTA)? Analytics Table
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What is the Federal Unemployment Tax Act (FUTA)? This video explains FUTA for CPA exam candidates and accounting students, covering what the federal unemployment tax is, who pays it, the FUTA rate and wage base, the credit for state unemployment taxes, and how to calculate the tax. A key REG and payroll taxation topic tested on the CPA exam. Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students. Video Timeline & Key Concepts: 0:00 — Introduction 1:36 — What is FUTA 3:20 — FUTA rates and wage base 10:22 — FUTA calculations Frequently Asked Questions: What is the Federal Unemployment Tax Act? The Federal Unemployment Tax Act, or FUTA, is a federal payroll tax that funds unemployment compensation programs. It is paid by employers and, together with state unemployment taxes, provides benefits to workers who lose their jobs. Who pays FUTA tax? FUTA is paid entirely by the employer and is not withheld from employee wages. Employers who pay wages above a threshold or who have employees for a required number of weeks are generally subject to FUTA. How is FUTA tax calculated? FUTA tax is calculated by applying the FUTA rate to each employee's wages up to the annual FUTA wage base. Wages above the wage base for an employee are not subject to additional FUTA tax for that year. What is the credit for state unemployment taxes? Employers who pay state unemployment taxes on time can generally claim a credit against their FUTA liability, which lowers the effective federal rate. This credit rewards timely payment of state unemployment taxes. How does FUTA differ from FICA? FUTA funds unemployment benefits and is paid only by employers, while FICA funds Social Security and Medicare and is shared between employers and employees. They are separate payroll taxes with different rates, bases, and purposes. #CPAexam #CMAexam #enrolledagentexam #accountingcourses #collegecourses #courses #REG #FUTA #payrolltax #taxation #tax #ProfessorFarhat #accountingstudents
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