Per Diem Rates from the U.S. General Services Administration
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Rates are set by fiscal year, effective October 1 each year. Find current rates in the continental United States ("CONUS Rates").
Employer's Liability for Employment Taxes
In addition to federal income taxes and social security and Medicare taxes withheld from an employee's pay, there are other employment-related taxes, such as Federal Unemployment Taxes (FUTA) and State Unemployment Taxes (SUTA) that only the employer is responsible for, with a few exceptions in AK, NJ, PA, where employees are subject to withholdings for state unemployment taxes).
An employer is liable for:
- One-half of social security taxes
- One-half of Medicare taxes
- 100% of Federal Unemployment Insurance Tax (FUTA)
- And in most cases, state unemployment taxes (SUTA, with exceptitons stated above)
State Withholding for Unemployment Insurance
Regarding federal unemployment taxes, only the employer is responsible for paying this tax; it is not withheld from an employee's gross wages. However, state unemploymennt taxes, while also an employer's responsibility to pay, there are a few states that do withhold state unemployment taxes from employees' wages.
Currently, these states are:
- Alaska
- New Jersey
- Pennsylvania
Check your state's requirements.
Federal Unemployment Taxes (FUTA)
Gross wages up to $7,000 paid to each employee for a calendar year are subject to FUTA taxes. For example, if you have two employees and paid gross wages of $15,000 to one of them and $6,000 to the other, total FUTA wages subject to FUTA tax is $13,000 ($7,000 plus $6,000).
FUTA Tax Rate and Credits
For 2023, the FUTA tax rate is 6.0% (.06). However, most employers get a credit of up to 5.4% (.054) against the tax, lowering it to as low as 0.6% (.006)
Deadline to Receive the Full 6.0% Credit:
Only employers that pay all the required state unemployment fund contribution for 2023 by April 15, 2024 (Form 940) will receive the full credit. The credit for contributions made after April 15, 2024 is limited to 90% of the pre-deadline credit.
Credit Reduction States
A state that hasn't repaid money it borrowed from the federal government to pay unemployment benefits is called a credit reduction state. The U.S. Department of Labor determines these states. For 2023, California, New York, and the U.S. Virgin Islands are FUTA credit reduction states. If you are in one of these states, your FUTA credit for state unemployment taxes is reduced on Schedule H. Credit reduction states are listed on Schedule A of Form 940 and in Schedule H instructions.
Computing the Credit Reduction:
If an employer pays wages that are subject to the unemployment tax laws of a credit reduction state, that employer must pay additional federal unemployment tax as a result of having its regular FUTA rate of 6.0% reduced by a lower credit rate. Form 940 is used to file FUTA tax.
The additional FUTA tax is computed by reducting the standard 5.4% credit by the credit reduction rate for your state.
Example:
- You're an employer in a credit reduction state.
- The regular FUTA tax rate before any credit reduction is 6.0%.
- The standard FUTA tax credit before any credit reduction is 5.4%.
- Your state's credit reduction rate is 0.3% (.003).
- Your reduced FUTA tax credit is 5.1% (5.4% minus 0.3%)
Your effective FUTA tax rate is 0.9% (6.0% minus 5.1%), an additional 0.3% tax.
Additional Credit
You may receive an additional credit if you have a state experience rate lower than 5.4% (0.054). This applies even if your rate varies during the year. This additional credit is the difference between your actual state unemployment tax payments and the amount you would have been required to pay at 5.4%.
Special Credit for Successor Employers
You may be eligible for a credit based on the state unemployment taxes paid by a predecessor. You may claim this credit if you're a successor employer who acquired a business in 2023 from a predecessor who wasn't an employer for FUTA purposes and, therefore, wasn't required to file Form 940 for 2023. See section 3302(e). You can include amounts paid by the predecessor as if you paid them. If the predecessor was required to file Form 940, see the line 5 instructions.
Reporting FICA and FUTA Taxes
If you're self-employed and have regular business employees as well as household employees, you have two options for reporting FICA and FUTA taxes:
Trust Fund Taxes
Federal employment taxes required to be withheld and remitted to the U.S. Treasury are called Trust Fund taxes. Non payment of these taxes can result in a penalty equal to 100% of the tax due. Moreover, if you intentionally don't turn these taxes over to the U.S. Treasury, you can face criminal prosecution.