What is the Federal Unemployment Tax Act (FUTA)?
The Federal Unemployment Tax Act (FUTA) is a U.S. federal law that imposes a tax on employers to fund unemployment benefits for workers who lose their jobs. The tax is calculated as a percentage of employee wages, with the employer being responsible for paying the tax, not the employee. FUTA provides funding to state unemployment agencies, enabling them to offer unemployment insurance to eligible individuals. The tax is reported and paid annually, and employers must file Form 940 with the IRS to comply with FUTA requirements.