Final answer:
The Federal Unemployment Tax Act (FUTA) is legislation that requires employers to pay a payroll tax, financing state unemployment compensation for workers who have lost their jobs. The rate is 6.0%, but with state credits, it effectively reduces to 0.6% for most employers, and this tax is paid solely by employers, not employees.
Step-by-step explanation:
The Federal Unemployment Tax Act (FUTA) is United States legislation that imposes a payroll tax on employers to help fund state workforce agencies. Employers are required to pay this tax at a rate of 6.0% on the first $7,000 paid to each employee as wages during the year. However, employers generally receive a credit of up to 5.4% for state unemployment taxes paid, effectively reducing the FUTA tax rate to 0.6% for most employers. This tax is part of the federal government's efforts to assist states in covering the cost of unemployment compensation for workers who have lost their jobs.
It's also important to note that FUTA taxes are not withheld from employee wages but are instead paid solely by employers. The funds from FUTA contribute to the unemployment benefits that unemployed workers may claim, thus providing them with temporary financial assistance. The administration and eligibility for unemployment benefits, though funded by FUTA, are determined at the state level.