Question

How is an employer’s unemployment tax rate determined?

Answer 1

An employer’s unemployment tax can be FUTA (Federal Unemployment Tax) and SUTA (State Unemployment Tax).

For federal unemployment tax an employer has to submit form 940 and should pay wages to employees who are not household or agricultural employees. The FUTA tax rate is 6% and applies to the first $7,000 that an employer pays to each employee as wages during the year. The employer will receive a credit up to 5.4% if it is subjected to state unemployment tax as well.

SUTA taxes do not have a standard rate. Each state sets its own rates.