FUTA Tax Responsibility Regarding Aliens in the U.S.

June 15, 2019
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According to the Federal Unemployment Tax Act (FUTA), employers are required to pay federal unemployment taxes to support the government’s benefit programs for involuntarily unemployed individuals. If an employer’s FUTA payroll liability exceeds $500 per quarter, the company must make quarterly payments to the Internal Revenue Service.

U.S. Aliens and FUTA

The Internal Revenue Service says employers should generally recognize wages paid to aliens in the U.S. as the same as wages paid to U.S. citizens when calculating FUTA taxes. As a result, when filing with Form 940, the FUTA tax rate applies to the first $7,000 of each employee’s wages regardless of their current citizenship status. However, there are some services where employers are exempt from paying FUTA taxes:

  • Pay to agricultural workers
  • Pay to household employees (unless the compensation to a resident alien exceeds a certain dollar amount during any calendar quarter of the current year or prior year)
  • Pay to employees of tax-exempt organizations
  • Pay to nonresident aliens temporarily present in the U.S. in F-1, J-1, M-1, Q-1 or Q-2 nonimmigrant status

The IRS emphasizes that wages paid to aliens in F-1, J-1, M-1, Q-1 or Q-2 nonimmigrant status are subject to standard FUTA taxes if they have become resident aliens for tax purposes. If you have any questions as an employer navigating payroll questions, our team is on hand to help you satisfy all the requests of the IRS.

Other FUTA Special Circumstances

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This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.