What Are FUTA and SUTA Payroll Reports?
An employer is obligated to pay the Federal Unemployment Tax Act and State Unemployment Tax Act for its employees. Essentially, FUTA and SUTA cover qualifying employees in the event they become unemployed. Paying into the FUTA and SUTA system provides unemployment compensation to unemployed workers. FUTA and SUTA payroll reports show the status of the employer tax payments.
The Federal Unemployment Tax Act provides that employers must pay into the the nation's unemployment benefits system. In 2012, The FUTA tax works out to be 6 percent of the first $7,000 of each employee's pay. Employers must file IRS Form 940 by January 31 each year to document the amount of FUTA tax paid. An employer must deposit FUTA taxes at the end of each quarter of the calendar year.
The State Unemployment Tax Authority is the state unemployment tax, which varies state by state. In many cases, it depends on the level of unemployment within the state. For example, in 2012, the maximum SUTA tax rate in Alabama is 6.74 percent on the first $8,000 in wages while the maximum tax rate in Massachusetts is 12.27 percent on wages of $14,000. In addition, each state administers the payout of its unemployment benefits differently and decides the length of benefits. If the employer operates in a state that qualifies for a FUTA credit reduction and it pays its unemployment taxes on time, the employer is entitled to receive a credit, which reduces the FUTA tax rate. The maximum FUTA credit reduction is 5.4 percent, which reduces the net FUTA taxes payable to 0.6 percent.Source: yourbusiness.azcentral.com