What’s the difference between federal (FUTA) and state (SUTA) unemployment taxes?

Federal Unemployment Tax (FUTA) and State Unemployment Tax (SUTA) are both paid by employers, but serve different purposes and are administered differently:

• FUTA (Federal)
   

  • Collected by the federal government.

  • Provides funding for state unemployment agencies and covers administrative costs.

  • Standard tax rate is 6% on the first $7,000 of each employee’s wages, with credits available for timely state payments.

 

• SUTA (State)
   

  • Collected by individual states.

  • Funds the actual unemployment benefits paid to eligible workers.

  • Each state sets its own tax rates, taxable wage base, and may adjust rates based on an employer’s experience rating.