You may think that that you are operating your venture as per the book only to get a notice that you have not been making tax payment as per the Federal Unemployment Tax Act (FUTA) It is important to know that many people are not compliant of these taxes because they even don’t know they exist. It is crucial to that the federal unemployment tax act provide legal authority to collect taxes from that business with workers. With the revenue that is collected, the government then support the state unemployment agencies. In return, the state agencies then pay the out-of-work people who have qualified for unemployment insurance.
There is the need to know that as a business you can make a quarterly or annual payment. There is the need to know that the revenue is a payroll tax but that name can be quite misleading. Unlike the case of social security tax, there is the need to know that FUTA tax comes from an employer and not an employee. The government refers the FUTA tax as a payroll tax because it bases the amount to be paid upon the worker’s salary.
It is essential to know that as an employer, you do not have to pay taxes on the wages of all the workers. If your venture is a family-owned business; there is the need to know that you can receive special consideration. If you are the employer, you do not have to pay these taxes on the income of your spouse or children who are below the age of twenty-one. If your business use independent contractor; you need to know that you are also exempted from paying these taxes. The other types of people that are exempted these types of taxes include religious organizations and the nonprofit groups. It is vital to ensure that you make a step of ascertaining with your state tax agency.
It is important to know that the typical rate of the tax is 6% on the first $7,000 that you pay to your worker. That means that if an employee earned $7,000, the employer would pay $420 which is the 6% of that income. There is the need to know that even in a case where the employee earns more than the seven thousand dollars, the employer will only need to pay 6% of the first $7,000 which is still $420. However, when the employee makes less than the $7,000, the employer will pay less than that.
There are various aspect of FUTA tax as a business person that you need to understand. It is, therefore, essential to ensure that you look for a professional who will help you in these matters.