Federal Unemployment Tax Act (FUTA)

Definition - What does Federal Unemployment Tax Act (FUTA) mean?

The Federal Unemployment Tax Act is a law that businesses are required to follow regarding mandatory payments made on each employee's behalf into an account that would cover any unemployment that arises in the future or at least a part of it. The act also requires employers to file yearly statements and payments relating to the number of employees they had over the previous year and which also notes the amount earned and type of work performed.

Justipedia explains Federal Unemployment Tax Act (FUTA)

If a person becomes unemployed they are entitled to draw from a fund that is created through these employer contributions and topped up by the government. The rate of unemployment pay is directly related to the level of FUTA tax paid as it is proportionate to an employee's annual wage in all cases.

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