940 Schedule A Credit Reduction Rates 2017-2024

Hi, welcome to the Easy Payroll Guide. My name is Karen Hutchinson and in this video, we're going to be talking about how to calculate your federal unemployment liability. The federal unemployment is also known as FUTA, which stands for Federal Unemployment Tax Act, so you'll hear these two terms being used synonymously. We're going to be calculating our federal unemployment liability in preparation for completion of the IRS Form 940, which is the federal unemployment form. A few things that we need to know about FUTA: You must make a deposit for your federal unemployment tax liability once your liability reaches $500. Now, what this means is you need to keep track of your FUTA liability. Once it reaches $500, you must make a deposit. If your liability doesn't reach $500 throughout the entire calendar year, then you can wait and make your deposit with your Form 940, which would be at the beginning of the new year. So, you're going to be calculating your 940 for the entire year, which will be due in January of the following year, and that's when you can pay your liability if it doesn't reach $500. What you need to know is that the federal unemployment tax is paid on the first $7,000 of each employee's wages. This is a tax that is paid by the employer. It is not withheld from the employee's paycheck, and it is only paid on the first $7,000 in wages. The current federal unemployment rate is 6%. However, most states are eligible for a credit, which will reduce it to 6 tenths of a percent. The Federal Unemployment Tax Act is in place to oversee the state's unemployment agencies. So, the majority of your unemployment tax is going to go to the state. However, because the...