The Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA) authorize the Internal Revenue Service and the Maryland Department of Labor’s Division of Unemployment Insurance to collect unemployment taxes from Maryland employers. As a Maryland employer, the federal and state governments limit the amount of wages on which you pay unemployment.
The IRS publishes the federal unemployment tax rates and limit in its Circular E, or the Employer’s Tax Guide. To determine the FUTA limit, consult the Circular E for the corresponding tax year. At the time of publication, the federal unemployment wage base, or limit, is the $7,000 paid to each employee. This means that you pay federal unemployment tax at the rate that the Circular E mandates on the first $7,000 paid to each employee for the year.
Each state has its own wage base; therefore, calculate your Maryland unemployment tax according to the wage base that the state government sets for the year. At the time of publication, employers pay state unemployment tax on the first $8,500 paid to each employee. Note that taxable wages for FUTA and SUTA purposes generally include all compensation paid to employees, including regular and overtime wages, salaries, commissions, bonuses, back pay, and vacation and holiday pay. Once you pay state unemployment tax on the annual wage base, you do not owe any more unemployment tax on that employee for the year. If an employee does not meet the annual wage limit, pay the tax on whatever amount she earned.
Per the 2011 Circular E, the FUTA rate is 6 percent after June 30, 2011. You may take a credit against your federal unemployment tax if you paid your Maryland unemployment tax as required; this lowers your FUTA rate to .6 percent. Your Maryland unemployment tax rate depends on whether you’re a new employer and your experience with layoffs – the more benefits charged on your account, the higher the rate. To arrive at your FUTA and SUTA liabilities for each employee for the year, multiply your tax rate by the annual wage base.
The IRS requires you to file federal unemployment tax returns annually on Form 940. If your FUTA liabilities exceed $500 for the quarter, make quarterly deposits via the IRS electronic payment system. If the liability is $500 or less, you may carry the balance over to the next quarter and pay it in the quarter that you accumulate more than $500. The Maryland unemployment division requires you to pay state unemployment taxes and file contribution reports quarterly.
- IRS.gov: Circular E, The Employer's tax Guide 2011
- Comptroller of Maryland: Taxable Wages
- American Payroll Association: State Unemployment Insurance Taxable Wage Bases 2008 - 2011
- World Health Organization. "Rolling updates on coronavirus disease (COVID-19)." Accessed April 7, 2020.
- Congress.gov. "H.R. 748—CARES Act." Accessed April 7, 2020.
- United States Department of Labor. "UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 15-20." Accessed July 1, 2020.
- Whitehouse. "Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019." Accessed Sep. 8, 2020.
Grace Ferguson has been writing professionally since 2009. With 10 years of experience in employee benefits and payroll administration, Ferguson has written extensively on topics relating to employment and finance. A research writer as well, she has been published in The Sage Encyclopedia and Mission Bell Media.