Glossary · Payroll & taxes
FUTA (Federal Unemployment Tax Act)
Federal payroll tax of 6% on the first $7,000 of each employee's wages, partially offset by SUI credits.
All terms
Entravia Editorial
The Federal Unemployment Tax Act (FUTA) imposes a 6.0% tax on the first $7,000 of each employee's annual wages. Employers in states with adequately funded SUI programs typically receive a 5.4% credit, reducing the effective FUTA rate to 0.6%.
A PEO files FUTA under its own FEIN for co-employed workers in most cases. CPEOs carry explicit IRS-recognized tax-liability assurance for FUTA filings.
Related terms
- SUI / SUTA (State Unemployment Insurance)State payroll tax that funds unemployment benefits. Rates are experience-rated based on an employer's claims history.
- CPEO (Certified PEO)A PEO certified by the IRS under the Small Business Efficiency Act, providing client businesses explicit federal employment-tax liability assurance.
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