How Do You Figure Your FUTA Tax Liability for Each Quarter?

You owe FUTA tax on the first $7,000 you pay to each employee during the calendar year after subtracting any payments exempt from FUTA tax. The FUTA tax is 6.0% (0.060) for 2025. Most employers receive a maximum

Instructions for Form 940 (2025) 5

credit of up to 5.4% (0.054) against this FUTA tax. Every quarter, you must figure how much of the first $7,000 of each employee’s annual wages you paid during that quarter.

Figure Your Tax Liability Before you can figure the amount to deposit, figure your FUTA tax liability for the quarter. To figure your tax liability, add the first $7,000 of each employee’s annual wages you paid during the quarter for FUTA wages paid and multiply that amount by 0.006.

The tax rates are based on your receiving the maximum credit against FUTA taxes. You’re entitled to the maximum credit if you paid all state unemployment tax by the due date of your Form 940 or if you weren’t required to pay state unemployment tax during the calendar year due to your state experience rate.

Example. During the first quarter, you had three employees: Mary Smith, George Jones, and Jane Moore. You paid $11,000 to Mary, $2,000 to George, and $4,000 to Jane. None of the payments made were exempt from FUTA tax.

To figure your liability for the first quarter, add the first $7,000 of each employee’s wages subject to FUTA tax:

$7,000 Mary’s wages subject to FUTA tax 2,000 George’s wages subject to FUTA tax

• 4,000 Jane’s wages subject to FUTA tax

$13,000 Total wages subject to FUTA tax for the first quarter

$13,000 Total wages subject to FUTA tax for the first quarter x 0.006 Tax rate (based on maximum credit of 5.4%)

$78 Your liability for the first quarter

In this example, you don’t have to make a deposit because your liability is $500 or less for the first quarter. However, you must carry this liability over to the second quarter.

If any wages subject to FUTA tax aren’t subject to state unemployment tax, you may be liable for FUTA tax at the maximum rate of 6.0%. For instance, in certain states, wages paid to corporate officers, certain payments of sick pay by unions, and certain fringe benefits are excluded from state unemployment tax.

Example. Mary Smith and George Jones are corporate officers whose wages are excluded from state unemployment tax in your state. Jane Moore’s wages aren’t excluded from state unemployment tax. During the first quarter, you paid $11,000 to Mary, $2,000 to George, and $4,000 to Jane.

$ 9,000 Total FUTA wages for Mary and George in first quarter x 0.060 Tax rate

$540 Your liability for the first quarter for Mary and George

$4,000 Total FUTA wages subject to state unemployment tax x 0.006 Tax rate (based on maximum credit of 5.4%)

$24 Your liability for the first quarter for Jane

$540 Your liability for the first quarter for Mary and George

• 24 Your liability for the first quarter for Jane

$564 Your liability for the first quarter for Mary, George, and Jane

In this example, you must deposit $564 by April 30 because your liability for the first quarter is more than $500.