Payroll Taxes

Learn more about keeping your business compliant with payroll tax requirements.

Unemployment Tax Laws by State

Part of employers' payroll tax responsibilities is to pay state unemployment taxes to fund unemployment compensation benefit programs. If you are an employer in Alaska, New Jersey, or Pennsylvania, you may also be required to withhold unemployment taxes from your employees' wages.

The Federal Unemployment Tax Act (FUTA) imposes a payroll tax on employers, based on the wages they pay to their employees. Unlike some other payroll taxes, the business itself must pay the FUTA tax. You do not withhold the FUTA tax from an employee's wages.

Is your business required to pay the FUTA tax? It is required to do so if during the current or the preceding calendar year you meet either of the following tests:

  • You pay wages totaling at least $1,500 to your employees in any calendar quarter; or
  • You have at least one employee on any given day in each of 20 different calendar weeks (the 20 weeks need not be consecutive, the "one employee" need not be the same individual and a "calendar week" is a period of seven successive days beginning with Sunday and ending at the close of the following Saturday; however, short weeks at the beginning and end of a calendar year are counted as calendar weeks).

State Unemployment Tax Laws are Similar to Federal Laws

Similar to how the federal unemployment compensation program is funded, in order to fund each state's unemployment compensation program almost all the states impose unemployment taxes directly on employers. Also similar to the federal system is the fact that except for a few states, you do not withhold these taxes from your employees' wages.

For a detailed summary about employer liability for unemployment taxes, we have the following article: Employer Liability for Unemployment Taxes

If you are looking for unemployment tax laws specific to your state or jurisdiction, please visit the respective secretary of state or department of labor site. 

Category : Payroll Taxes
Tags :
  • Unemployment
  • Payroll Taxes

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