For us accountants January brings the greatest payroll function of the year; printing the year end payroll reports. These include the W-2’s, W-3 and Form 940. They all must tie to the combined total of the quarterly 941 reports and the deposits made to the Internal Revenue Service.
Taxable Wage Base for FUTA
$7,000 is the taxable wage base for FUTA tax. Wages up to $7,000 per employee is taxed at 6% and a credit is allowed up to 5.4% contingent on participation in the employer’s state unemployment program.
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.