Federal Unemployment 
(FUTA) Tax(p81)

You must pay FUTA tax if you meet either of the following tests.

• You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year.
• You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year.

These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. See Family Employees, earlier.

Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as "H-2(A) visa workers") are exempt from FUTA tax. However, include your employment of these workers and the wages you paid them to determine whether you meet either test above.

Payments in kind for farm labor are not cash wages. Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe.

The gross FUTA tax is 6.2% of the first $7,000 cash wages you pay to each employee. However, you are given a credit of up to 5.4% for the state unemployment tax you pay. The net tax rate, therefore, can be as low as 0.8% (6.2% − 5.4%). If your state tax rate (experience rate) is less than 5.4%, you may still be allowed the full 5.4% credit.

If you do not pay the state tax, you cannot take the credit. If you are exempt from state unemployment tax for any reason, the full 6.2% rate applies. See the Instructions for Form 940 for additional information.

For more information on FUTA tax, see Publication 51 (Circular A).

The FUTA tax is imposed on you as the employer. It must not be collected or deducted from the wages of your employees.

Report FUTA tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. The 2008 Form 940 is due February 2, 2009 (or February 10, 2009, if you timely deposited the full amount of your 2008 FUTA tax).

If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. You must add it to the tax for the next quarter. If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the February 2, 2009, due date.

If you are subject to the electronic deposit requirement, you must use EFTPS to deposit FUTA tax. See Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes, earlier, for a discussion of the requirement for making deposits electronically.