Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?.For IRS, the facts that provide evidence of the degree of control and independence fall into three categories: The rules that determine classification for employment at the Federal level follow common law. Misclassifications can result from erroneous interpretation of the rules or from intentional disregard of the law. Consequently, employers do not remit the appropriate amount of Federal and state employment taxes, and workers may not receive unemployment insurance benefits or the appropriate protections afforded to them as employees under the Fair Labor Standards Act. Worker misclassification occurs when an employer incorrectly classifies a worker as a non-employee. The state unemployment tax, paid to state workforce agencies, is used solely for the payment of benefits to eligible unemployed workers. For a table of current tax rates and taxable wage base information for individual states, click here and select Significant Provisions of State UI Laws. State law determines individual state unemployment insurance tax rates. The FUTA tax rate for employers in states not subject to a FUTA credit reduction is generally 0.6% (6.0% - 5.4%), for a maximum FUTA tax of $42.00 per employee, per year (.006 X $7, 000 = $42.00). Employers who pay their state unemployment taxes on a timely basis receive an offset credit of up to 5.4% regardless of the rate of tax paid to the state. The taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Federal Tax RateįUTA taxes are calculated by multiplying 6.0% times the employer's taxable wages. The new forms have been updated to include the latest information for states with credit reductions for FUTA year 2012. Click here for IRS forms 940 () and 940 Schedule A () for FUTA year 2012 Federal Unemployment Taxes. In addition, FUTA pays one-half of the cost of extended unemployment benefits (during periods of high unemployment) and provides for a fund from which states may borrow, if necessary, to pay benefits. FUTA covers the costs of administering the UI and Job Service programs in all states. Employers pay this tax annually by filing IRS Form 940. The Federal Unemployment Tax Act (FUTA), authorizes the Internal Revenue Service(IRS) to collect a Federal employer tax used to fund state workforce agencies.

However, some state laws differ from the Federal law and employers should contact their state workforce agencies to learn the exact requirements. Generally, employers must pay both state and Federal unemployment taxes if: (1) they pay wages to employees totaling $1,500, or more, in any quarter of a calendar year or, (2) they had at least one employee during any day of a week during 20 weeks in a calendar year, regardless of whether or not the weeks were consecutive. Unemployment Insurance (UI) is a federal-state program jointly financed through Federal and state employer payroll taxes (federal/state UI tax). Unemployment Insurance Tax Topic Unemployment Insurance Taxes

Federal tax form for unemployment