Federal Unemployment Tax Act

For Wages Employers Paid in 2024

California employers fund regular Unemployment Insurance (UI) benefits through contributions to the state’s UI Trust Fund on behalf of each employee. Tax-rated employers pay a percentage on the first $7,000 in subject wages paid to each employee in a calendar year. The UI rate schedule and amount of taxable wages are determined annually. New employers pay 3.4 percent (.034) for a period of two to three years. We notify employers of their new rate each December. The maximum tax is $434 per employee per year (calculated at the highest UI tax rate of 6.2 percent x $7,000.)

Employers also pay Federal Unemployment Tax Act (FUTA) taxes to the federal government to help pay for:

• Administration of the UI program.
• UI loans to insolvent states.
• Federal extension benefits.

Tax Information

California has an outstanding federal loan balance, which means employers will have to pay a higher FUTA tax. California began borrowing money from the federal government on June 3, 2020 because of the COVID-19 crisis. As mentioned in the January 2025 UI Fund Forecast, California’s loan balance is expected to be about $22.9 billion by the end of 2026.

Normally, federal law provides employers with a 5.4 percent tax credit toward the 6.0 percent regular tax when they file their federal Employer’s Annual Federal Unemployment (FUTA) Tax Return (Form 940). However, this credit will be reduced by 0.9 percent to a 4.5 percent credit for the 2024 tax year. This means California employers will pay an extra $63 per employee for the 2024 tax year. FUTA costs are expected to keep going up until the outstanding loan is paid off and the credit will be reduced by an additional 0.3 percent each year. For more information, visit FUTA Credit Reduction on the IRS website.

FUTA Recertification

Each year, the EDD and the IRS compare the amounts you reported on your IRS Form 940 to the Total Subject Wages (Line C) and UI Taxable Wages (Line D2) reported on your EDD Quarterly Contribution Return and Report of Wages (DE 9). If the amounts are not the same, you have what is referred to as an out-of-balance condition and may get a notice from the IRS or the EDD.

An out-of-balance condition can happen when the EDD is not notified of a change in your organization or Federal Employer Identification Number (FEIN). You can update your FEIN and make changes to your account online using e-Services for Business.

The IRS uses the FUTA recertification process to make sure the total taxable wages you claimed on the Employer’s Annual Federal Unemployment (FUTA) Tax Return (Form 940) or the federal Household Employment Taxes (Form 1040, Schedule H) were paid to the state. You must meet both the state and federal payroll tax requirements.

To request a FUTA recertification online:

1. Go to Ask EDD.
2. Select the Payroll Tax category.
3. Select the FUTA Recertification sub-category.
4. Select the FUTA Recertification topic.
5. Select Continue and complete the necessary information.

If you have questions about your request, call our FUTA Recertification Unit at 1-916-654-8545.