Federal Unemployment Tax Act (FUTA)
What is the Federal Unemployment Tax Act (FUTA)?
The Federal Unemployment Tax Act (FUTA) is the original legislation that taxes businesses to contribute to unemployment agencies. This allows the government to tax businesses with employees for the purpose of collecting revenue. State unemployment agencies then receive the allocated revenue and pay it to unemployed workers. Workers who claim unemployment insurance must qualify. Most employers pay both a federal and a state unemployment tax.
Related Terms: State Unemployment Insurance, FUTA