Federal Unemployment Tax Rate Default

[acctax01]

Tax Table: What numbers should I use? The Federal unemployment tax rate is 6.2%; however, when figuring quarterly deposit I should use 0.8%. PayWindow federal tax table defaults to 0.8% for FUTA, should I change the tax table FUTA percent to 6.2% or leave it at 0.8%. I searched PayWindow FAQ and found an old post of a similar question but I’m still confused about the answer. The answer was a cut and paste from the IRS webpage, but it still does not answer the question, should I use 0.8% or 6.2% when setting up the Federal Unemployment rate tax table in PayWindow? Thanks.

[Paul Mayer]

To get started, let me say that all discussions regarding federal level taxes and withholdings that are the responsibility of the employer can be found in IRS Publication 15. FUTA is also discussed there.

FUTA stands for "Federal Unemployment Tax Act" and is a tax paid on the wages of employees by the employer. The tax is 6.2% of employee wages up to $7000 per employee. That equates to $434 per person per year. There is relief from this rate built in to the calculation. Per Pub 15, "Generally you can take a credit against your FUTA tax for amounts that you paid into state unemployment funds". The credit is up to 5.4% which leaves your FUTA tax rate at .8% or $56 per employee per year. The credit has some stipulations and your state has to be in the good graces of the federal government for that to work. New York employers lost this credit a couple of years ago. Generally, if you pay your state unemployment tax on time, you get the credit.