The Department of Labor runs the loan program and determines the credit reduction states each year see FUTA Credit Reduction for more information. See the Instructions for Form 940 to determine the credit.Ĭredit Reduction State: This is a state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits. Generally, you're entitled to the maximum credit if you paid your state unemployment taxes in full, by the due date of the Form 940, and the state isn't determined to be a credit reduction state. If you're entitled to the maximum 5.4% credit, the FUTA tax rate after credit is 0.6%. Generally, if you paid wages subject to state unemployment tax, you may receive a credit of up to 5.4% of FUTA taxable wages when you file your Form 940. Your state wage base may be different based on the respective state’s rules. The $7,000 is often referred to as the federal or FUTA wage base. The tax applies to the first $7,000 you paid to each employee as wages during the year. 760, Reporting and Deposit Requirements for Agricultural Employers.įUTA tax rate: The FUTA tax rate is 6.0%. Additional information for agricultural employers is available in Publication 51, (Circular A), Agricultural Employer’s Tax Guide and Topic No. Additional information for household employers is available in Publication 926, Household Employer’s Tax Guide and Topic No. If you won't be liable for filing Form 940 in the future, see 'Final: Business closed or stopped paying wages' under Type of Return in the Instructions for Form 940 PDF.įor the household employers and agricultural employers tests, see Chapter 14 in Publication 15, (Circular E), Employers Tax Guide. For details, see 'Successor employer' in the Instructions for Form 940. However, don't include any wages paid by the predecessor employer on your Form 940 unless you're a successor employer. If a business was sold or transferred during the year, each employer who meets one of the conditions above must file Form 940. Count all full-time, part-time, and temporary employees. You had one or more employees for at least some part of a day in any 20 or more different weeks in 2021 or 20 or more different weeks in 2022.You paid wages of $1,500 or more to employees in any calendar quarter during 2021 or 2022, or.Under the general test, you're subject to FUTA tax on the wages you pay employees who aren't household or agricultural employees and must file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return for 2022 if:

There are three tests used to determine whether you must pay FUTA tax: a general test, household employers test, and agricultural employers test.

Most employers pay both a federal (FUTA) and a state unemployment tax.

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