Listen to a Business English Dialogue About Federal unemployment tax act
Isabelle: Hey Craig, have you ever heard of the Federal Unemployment Tax Act (FUTA) in finance?
Craig: No, I haven’t. What is it?
Isabelle: FUTA is a federal law that imposes a tax on employers to fund unemployment benefits for workers who have lost their jobs.
Craig: Oh, I see. So, it’s like a tax to support unemployment insurance programs?
Isabelle: Exactly! Employers are required to pay FUTA tax based on the wages they pay to employees, with certain exemptions and limitations.
Craig: That sounds important. How is the FUTA tax rate determined?
Isabelle: The FUTA tax rate is set by the federal government and may vary from year to year, depending on factors such as the state of the economy and the solvency of the unemployment insurance fund.
Craig: I see. Are there any exemptions or credits available for employers subject to the FUTA tax?
Isabelle: Yes, employers may qualify for a credit against their FUTA tax liability if they also pay state unemployment taxes, as well as exemptions for certain types of employees and wages.
Craig: Got it. Thanks for explaining, Isabelle. The Federal Unemployment Tax Act seems like an important component of the social safety net.
Isabelle: No problem, Craig. It helps provide financial assistance to workers who are temporarily unemployed through no fault of their own.