What is the FUTA tax limit for taxable wages paid to each employee?

The FUTA (Federal Unemployment Tax Act) tax limit for taxable wages paid to each employee is set at $7,000. This means that an employer is required to pay federal unemployment tax on the first $7,000 of wages paid to each employee during a calendar year. Any wages above this threshold are not subject to FUTA tax.

The significance of this limit is that it is intended to establish a cap, ensuring that employers contribute to the federal unemployment system only up to a certain point for each employee. This cap can affect the overall payroll tax burden on employers and is essential for effective payroll management.

Having a clear understanding of the FUTA tax limit helps in structuring employee compensation and accurately calculating mandatory taxes to avoid discrepancies during payroll processing and reporting.