About Form 940 FUTA and SUTA Tax for 2022
Updated on November 18, 2022 - 10:30 AM by Admin, TaxBandits
Under the Federal Unemployment Tax Act (FUTA), employers are subject to a payroll tax. These funds go towards unemployment compensation. There is also a payroll tax at the state level, this is called SUTA. At the end of the year employers must report these taxes on IRS Form 940. Keep reading for an overview of
FUTA and SUTA taxes.
The following topics are covered in this article:
1. What are FUTA and SUTA in Form 940?
Employers must understand both FUTA and SUTA and the difference between the two. FUTA is a federal law that was passed to generate funds needed for unemployed individuals. It stands for the Federal Unemployment Tax Act. Only employers pay FUTA taxes, not their employees.
Some states collect additional unemployment taxes from employers, this is called SUTA, or State Unemployment Taxes. The main takeaway is that FUTA taxes are deposited to the federal government and SUTA taxes are deposited at the state level.
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2. How is FUTA Tax calculated?
For 2022, the Form 940 FUTA tax rate is 6%. The amount of FUTA tax owed is calculated using the first $7,000 that you paid an employee for wages during the quarter. If the employee didn’t make $7,000 during the quarter, use the amount that they did make. Add together $7,000 per employee (or the amount they received in wages totaling less than $7,000) and then multiply the total by 0.006. This will give you your FUTA liability for the quarter. Employers that have paid FUTA taxes on time and in full are generally entitled to a credit.
3. Are there any exemptions from FUTA and SUTA taxes?
Certain types of organizations are exempt from FUTA and SUTA taxes as follows:
- Indian Tribal Governments,
- Tax-exempt organizations, and
- State or local government employers
are exempt from FUTA and SUTA taxes and they are not required to file a Form 940 with the IRS.
4. What is the Form 940 credit reduction state for 2022?
When a state borrows money from the federal government to cover unemployment benefits, but is not able to repay this amount in a certain timetable, the Department of Labor deems them a credit reduction state. For the tax year 2022, the credit reduction rate for California, Connecticut, Illinois, and New York is 0.3% and for the U.S. Virgin Islands is 3.6%..
Click here to learn more about Form 940 Credit Reduction.
5. What is the due date for FUTA taxes?
According to the IRS, employers should follow this schedule for making their FUTA tax deposits:
| If the undeposited FUTA tax is over $500 as of: | Deposit taxes no later than: |
|---|---|
| March 31 | April 30 |
| June 30 | July 31 |
| September 30 | October 31 |
| December 31 | January 31 |
Employers must file their Form 940, reporting FUTA taxes to the IRS by January 31, 2023 and by February 10, 2023 if the taxes are already paid.
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940 Form online filing.
