What is Illinois Futa Tax?
The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. The FUTA tax is separate from the Social Security Tax, Medicare Tax, Unemployment Insurance Tax and Withholding Income Tax.
How much is Illinois FUTA Tax?
The FUTA tax rate is 6.0% of taxable wages. The taxable wage base is the first $7,000 paid in wages to each employee during a calendar year. Employers who pay the state unemployment tax, on a timely basis, will receive a FUTA reduction credit of up to 5.4% regardless of the rate of tax they pay the state. Therefore, the net FUTA tax rate is generally 0.6% (6.0% – 5.4%), for a FUTA tax of $42 per employee, per year (.006 X $7,000. = $42.00).
Illinois – FUTA Tax Rate: is 0.6%
Illinois – FUTA Tax Limit: $7,000
Minimum FUTA Tax per employee per year (0.6%): $42
Maximum FUTA Tax per employee per year (6.0%): $420
| Year | State | Futa Tax Rate | Reduction Credit | Net FUTA Rate | FUTA Taxable Wage Base |
|---|---|---|---|---|---|
| 2016 | Illinois | 6.0% | -5.4% | 0.6% | $7000 |
Illinois FUTA Tax Rate and FUTA Tax Limits
The FUTA Tax is 6.0% of taxable wage on the first $7,000 of wages. There is a reduction of 5.4% FUTA Credit if State Unemployment Insurance is filed and paid to the state. The Net FUTA tax is therefore 0.6% of the first $7,000 in wages. There is no FUTA Tax for any wages over $7,000 per employee per year. The maximum FUTA Tax for each employee is limited to $42 per employee per year.
Illinois FUTA Tax Form
To file FUTA Tax, employers need to use Form 940. To qualify for FUTA reduction credit, employers will also need to file and pay their State Unemployment Insurance (UI) tax.
| Type | Form | Form Description |
|---|---|---|
| IRS | Form 940 | Federal FUTA Tax Form |
When is FUTA Tax Due?
Illinois FUTA Tax is due every year on January 31. The FUTA Tax must be under $500 by January 31. If the FUTA Tax is over $500, employers must deposit enough FUTA Tax every quarter to the IRS.
Who pays for Illinois FUTA Tax?
FUTA Tax is paid by the employer and should not be withheld from the employee’s paycheck. Unemployment Tax and FUTA Tax are the two taxes that are paid by the employer.
Social Security Tax, Federal Withholding and State Withholding are taxes that are deducted from employee’s paycheck.
| Tax | Who Pays The Tax? |
|---|---|
| FUTA Tax | Employer Responsibility |
| Unemployment Insurance | Employer Responsibility |
| Social Security Tax | 50% Employee Responsibility (6.2%) 50% Employer Responsibility (6.2%) |
| Medicare Tax | 50% Employee Responsibility (1.45%) 50% Employer Responsibility (1.45%) |
| Federal Withholding Tax | Employee Responsibility |
| State Withholding Tax | Employee Responsiblity |
Frequently Asked Questions on IL FUTA Taxes
- What does FUTA Tax stand for? Federal Unemployment Tax Act
- What is the FUTA Income Limit for 2015? $7,000. Wages over $7,000 are exempt from FUTA Tax
- Who pays for Illinois FUTA Tax? Employer pays for the FUTA Tax
- I need Illinois Recertification Letter for IRS. Click here for more information on Recertification Letter
Click here for more Frequently Asked Questions on FUTA Tax and Unemployment Tax.
For More Information on Illinois FUTA Tax and State Unemployment Tax
For more information, please contact Internal Revenue Service (IRS) regarding FUTA Tax (Form 940) at 800-829-4933.
For State Unemployment Tax, please visit Illinois Unemployment Insurance Department.
| Agency | Website |
|---|---|
| Internal Revenue Service | www.irs.gov |
| Illinois Dept of Labor | www.ides.illinois.gov |
| Illinois Dept of Revenue | www.revenue.state.il.us |
Illinois five largest cities in terms of population: Chicago, Aurora, Rockford, Joliet, and Naperville. The FUTA Tax and Unemployment Insurance is the same for all the locations.