FUTA Tax Responsibility Regarding International Organization Personnel and Companies Owned by Foreign Governments

In the United States, the federal and state governments collect taxes from employers to support benefits for the involuntarily unemployed. These taxes have been around since the establishment of the Federal Unemployment Tax Act in the 1930s, and they are a major payroll liability for employers in addition to Social Security and Medicare taxes. Employers are required to pay a rate that is a certain percentage of up to $7,000 of each employee’s wages.

While FUTA taxes do apply to certain foreign employers and employees in the United States, wages paid to employees of a foreign government or international organization are not subject to FUTA tax rates. According to the Internal Revenue Service, this includes wages for services by diplomatic and nondiplomatic representations.

The wages are not subject to the tax if the person is an employee of an agency wholly owned by a foreign government and performs services like those done by employees of the United States government or agency. The law also states that the United States must grant an equivalent exemption with respect to work done in a foreign country by employees of the United States government and its agencies.

Additionally, wages paid to employees of an international organization such as the United Nations and World Health Organization are not subject to FUTA taxes regardless of the citizenship and residence of employees. This includes any public, international organizations that receive the privileges of international organizations according to the International Organizations Immunities Act.

If you are a business owner deciding which of your employees to represent regarding FUTA taxes, check out Form 940 from the IRS and work with our team to manage your payroll and tax responsibilities with ease.

Other FUTA Special Circumstances

• U.S. Citizens and Resident Aliens Abroad
• Aliens in the U.S.
• Persons Employed in U.S. Possession/Territory
• Persons with Foreign Employer

Work with the Experts

1-800Accountant is a virtual accounting firm merging the convenience of technology with live support from real professionals, making taxes easy and personable for individuals and small businesses. Focus on growing your bottom line while our team of accountants, certified public accountants, and enrolled agents perform the heavy lifting – tax advisory and preparation, payroll, bookkeeping, and audit defense. For professional, year-round services at an affordable price, get in touch with us and schedule your consultation with America’s leading small business accounting firm.