The first thing to understand about Federal Unemployment Taxes is that it is the sole responsibility of employers, not employees. This tax is what is used to pay unemployment benefits to workers who lose their jobs. How much federal unemployment taxes (futa) that are paid by an employer can vary from year to year, but for the tax year 2011, it is 6.2% of taxable wages, based on the first $7000 that is paid to each employee in the tax year. FUTA taxes are reported on Form 940, which is filed annually. It is important to realize that FUTA taxes are separate from the State Unemployment Taxes that are levied according to where you live. However, if an employer pays his FUTA taxes on time, he is eligible to recieve a federal credit for any state taxes he also has to pay, up to a ceiling of 5.4% of the taxable wages. This is a huge advantage, so remember to pay on time and claim this credit when filing your FUTA tax return.
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