What is Federal Unemployment Tax?
The Federal Unemployment Tax Act (FUTA) is a payroll tax paid by employers on employee wages. The tax is 6.0% on the first $7,000 an employee earns; any earnings beyond $7,000 are not taxed. Since almost all small business owners will receive a credit up to 5.4% for any state unemployment taxes they pay. The federal tax credit is the same regardless what your actual state tax rate is. The actual FUTA percentage is usually 0.6%.
You are required to pay penalties for undeposited or unpaid employment taxes, and for late payroll tax returns. The IRS will calculate separate penalty for each type of delinquency, and then add up the penalty for each and combine them to determine the total amount.
Liability and negligence penalty for taxes not withheld at all.
The penalty applies when employers fail to withhold taxes at all. This sometimes happens if employees have terminated or have insufficient current wages on which to pay the taxes due to various year-end adjustment items.
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