what is the federal unemployment tax act futa 
the federal unemployment tax act futa is a federal law that imposes an additional tax on employers on top of existing federal income and payroll taxes the money raised through futa is allocated to state unemployment insurance agencies which fund unemployment benefits for individuals who are out of work futa taxes are only paid by employers which means individual taxpayers are not responsible for paying them the futa tax rate is 6 and only applies to a certain dollar figure paid to employees during the year 1understanding the federal unemployment tax act futa futa is a federal law that raises revenue to administer unemployment insurance and job service programs in every state as directed by the act employers are required to pay annual or quarterly federal unemployment taxes they make up a part of what is commonly known as payroll taxes the tax rate is 6 according to the internal revenue service irs the tax applies to the first 7 000 you paid to each employee as wages during the year the 7 000 is often referred to as the federal or futa wage base your state wage base may be different based on the respective state s rules 1the funds in the account are used for unemployment compensation payments to workers who have lost their jobs although the amount of the futa payroll tax is based on employees wages it is imposed on employers only not their employees in other words it is not deducted from a worker s wages as such futa differs from other payroll taxes such as the social security tax which applies to both employers and employees 