Owning or running a business means you must be aware of all the legislation that affects your operation and bottom line. Tax law is no exception. To help project your revenue, you must be aware of what is coming out of your company earnings. One such deduction comes from the Federal Unemployment Tax Act, or FUTA.

What is FUTA?

Established to help with unemployment costs, FUTA is legislation allowing businesses with employees to be taxed by the government. Led by Franklin D. Roosevelt, the United States realized it needed better protection for its workers after the devastating effects of the Great Depression in the 1930s. In 1934, President Roosevelt established and led the Committee on Economic Security to help those suffering due to the Great Depression as well as prepare for similar incidents in the future. By 1935, the Social Security Act was created guaranteeing workers income after retirement. From this act came FUTA in 1939.

Who pays?

Although FUTA benefits the unemployed, all of the contributions come from the employer. They are required to pay tax on both the federal and state level on wages paid to employees. The payroll tax amount is established by the wages paid with no effect on what the worker actually brings home.

Who benefits?

While FUTA is financial relief for the unemployed, not every worker who loses a job qualifies. In order to submit a successful claim, the employee must have been let go at no fault of their own. For example, downsizing or economic downturns are common reasons people who lose their jobs qualify. Being fired for your own misconduct does not give you access to this fund.

How do you monitor claims?

Sometimes you’re only letting a few people go and it may seem easy to monitor the claims in-house, but it’s a much more complicated process. Legislation evolves and so do processes for following them correctly. Without someone solely dedicated to understanding the system, you can make expensive errors.

Additionally, the system varies from state to state with different agencies handling unemployment claims. Because of this, fraud is common among these claims causing companies billions of dollars each year. Once you’ve let someone go, you need to monitor if they file a claim and submit all paperwork on time to avoid a missed deadline that grants a former employee benefits when they shouldn’t be eligible.

Try Unemployment Tracker today

With such a complicated system, sometimes the best solution is to outsource the work to experts. At Unemployment Tracker, we developed a system to help businesses monitor these claims across state lines to make sure they never miss an important deadline again. Get a free demo today and see how Unemployment Tracker can save you money today!