During the rough economic period of 2008 – 2011, some states borrowed money from the federal government to fund their unemployment benefits. Some of these states have failed to fully reimburse the federal government. Therefore, the IRS is directly assessing the employers in each of these states by reducing the federal tax credit currently at 5.4% in .3% increments.
Federal Unemployment Tax Act or FUTA for short is a part of the Internal Revenue Code and is an employer tax on wages paid to employees. It is used to fund unemployment benefits. The tax is paid on the first $7,000 of wages paid to every employee. It is reported via Form 940 https://businessecon.org/resources/. The Form must be filed and all taxes paid by January 31, 2021.
I dread January of every year. I have to spend so much time preparing the year-end payroll reports prior to the January 31 deadline. Not only must your quarterly’s and monthly’s tie together, but it has to match the general ledger at year-end.
