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Computing the tax. The FUTA tax is imposed at a single flat rate on the first $7,000 of wages that you pay each employee. Once an employee's wages for the calendar year exceed $7,000, you have no further FUTA liability for that employee for the year. The FUTA tax rate is 6 percent. That is the tax rate that applies to the first $7,000 in wages paid to each of your employees during the year. Credit for state unemployment taxes. You can generally claim credits against your gross FUTA tax to reflect the state unemployment taxes you pay.
Unlike the income tax, which is deducted from the salary of the employee, FUTA tax is not deducted from his pay check. Instead, it is the responsibility of the employee to pay the tax. FUTA tax is linked with the State Unemployment Tax Act (SUTA); therefore the latter is a must to calculate in order to pay the former, FUTA tax. Both taxes are of mandatory importance, as otherwise you will lose your tax credit.