The desire of many people is to run their own business. To have a successful business, however, you need to be compliant with every law to avoid getting into problems with the government. When it comes to paying taxes, you need to ensure you are compliant with all tax requirements. One such tax requirement is the Federal Unemployment Tax Act or FUTA.
As a business owner or employer, you should understand what FUTA is, why you should pay and when to pay it. Otherwise, you will get a notice that you have not made your FUTA payment. FUTA is a provision in the tax Act where the US government gets the legal authority to demand taxes from businesses. However, such businesses should have employees. The revenue collected is then diverted to state unemployment agencies. View here for more information about the Federal Unemployment Tax Act.
FUTA tax should be paid on a quarterly or annual basis. Although it is a type of payroll tax, it comes from the employer and not the employees. However, it is based on the worker’s income. A business will be required to make FUTA tax payment if their employees were paid $1500 or more within a single calendar quarter of the calendar year. Also, an employer would have to pay FUTA if they maintain a worker for at least 20 weeks during the year.
On the other hand, not every employer will pay FUTA tax on their employees. For some workers, the employer will not pay FUTA tax. For instance, a family business will be a special consideration. Therefore, employers will not pay FUTA on incomes by their parents, children below 21 years, and spouses. Other businesses that are exempted from FUTA tax are independent contractors, religious organizations, and nonprofit groups. Check out this company for more info about the Federal Unemployment Tax Act.
Another important thing you need to know is when you should pay your FUTA tax. There are employers who pay their FUTA tax once in a calendar year. However, many employers will have to make quarterly payments. If your FUTA tax liability for the year is below $500, you can wait for the filing deadline which is January 31 and make your payment.
In case your FUTA tax liability is more than $500, you will be required to at least make one quarterly payment. If the amount is below $500 for the first quarter, you carry it forward to the next quarter until it surpasses $500. However, you can leave payroll responsibilities to an expert as concentrate on other areas of your business that will contribute to the growth of your business. For more info related to the topic, please visit: https://en.wikipedia.org/wiki/Unemployment.