FUTA taxes are paid on a quarterly basis when you have $500 or more in tax liability, according to the amounts that you have put away from payroll. If you fall into this category, you are going to have to make sure that your payment is in by the last day of the month by the end of the quarter. Therefore, this would be April 30, July 31, October 31, and January 31. In the event that you have $500 or less in FUTA tax, you would carry it over to the next quarter without having to make a payment in the current quarter.
- Calculate the FUTA taxes for each payroll.
- When you have a FUTA tax liability of $500 or more send in a payment via the EFTPS – federal tax deposit system.
- When the end of the year comes, you have to pay the total amount of FUTA taxes due from the prior year when filing your annual unemployment tax report via Form 940.
How to Calculate FUTA Taxes
For each of your payrolls you are responsible for determining the amount you owe in FUTA taxes based off the total wages that you paid your employees, with the maximum amount being $7000 per employee. This total has to be multiplied by 0.6 and then set aside to be paid on a quarterly basis. Then, when the end of the year comes, you will file Form 940. This form will ask for the taxes from the prior year as well as the amount that you have already paid. The balance and Form 940 has to be sent to the IRS by January 31.
How to Pay and Report Unemployment Taxes
If you start a new business, you are going to have to designate the estimated number of employees when you fill out your employer ID application. This is going to let the IRS and your state know that you have a duty to pay and report unemployment taxes, so they know to contact you. If they do not contact you or you decide to hire your first employee, you are going to have to start the process yourself. You will register with your state and contact the IRS to get the ball rolling.
State Unemployment Taxes
Each state has an individual program when it comes to unemployment compensation benefits and for those responsible for funding those benefits. Usually, the state is going to set up a fund, which the taxes are paid. For more information, you will have to contact your state employment agency to learn more about paying and reporting state unemployment taxes.
TurboTax will ask you simple questions and help determine if you need to pay futa tax for your employees. TurboTax will also help you prepare and make W2 forms for your employees.