If an employee makes $35,000 for the year, what is the amount of FUTA tax if paid on time?

The Federal Unemployment Tax Act (FUTA) establishes a federal payroll tax that employers are required to pay in order to fund unemployment compensation for workers who have lost their jobs. The FUTA tax rate is currently set at 6.0% on the first $7,000 of an employee's wages.

To calculate the FUTA tax for an employee earning $35,000 in a year, you only consider the first $7,000 of that earnings, since FUTA does not apply to income beyond that threshold.

So, the calculation is:

1. Determine the applicable wage base: $7,000 (the maximum wage subject to FUTA tax).

2. Calculate the FUTA tax: 6.0% of $7,000 = 0.06 × $7,000 = $420.

However, but there's a credit available to employers for state unemployment taxes paid, which can reduce the FUTA tax rate effectively to 0.6% if the state taxes are paid on time. In such a case:

1. Effective FUTA tax rate after the credit: 0.6% (or 0.006).

2. Calculate the applicable FUTA tax again: 0.006 × $7