Employers pay Federal Unemployment Tax and file Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Only employers pay this tax. It is not deducted from the employee's wages. For more information, refer to the instructions for Form 940, and to Publication 15 Circular E, Employer’s Tax Guide.
For persons employed within the United States by a foreign employer
Wages paid for services performed within the United States for a foreign employer by a U.S. citizen, resident alien, or a nonresident alien employee are subject to FUTA taxes unless an exemption applies. Please refer to Certain Compensation Exempt From FUTA Taxes below.
For persons employed outside the United States by a foreign employer
Wages paid for services performed outside the United States for a foreign employer by a U.S. citizen, resident alien, or nonresident alien employee are not subject to FUTA taxes.
Certain Compensation Exempt From FUTA Taxes
Certain types of services are exempt from FUTA taxes. Examples of exempt services include:
- Compensation paid to agricultural workers, including foreign agricultural workers in H-2A nonimmigrant status;
- Compensation paid to household employees, including au pairs who are resident aliens in J-1 nonimmigrant status unless the compensation exceeds $1,000 during any calendar quarter of the current year or prior year;
- Compensation paid to employees of religious, charitable, educational, or certain other tax-exempt organizations (see Publication 557, Tax-Exempt Status for Your Organization, for more information);
- Compensation paid to nonresident aliens temporarily present in the United States in F-1, J-1, M-1, Q-1, or Q-2 nonimmigrant status, including:
- Nonresident alien students in F-1, J-1, M-1, or Q-1 nonimmigrant status
- Nonresident alien teachers and researchers in J-1 or Q-1 nonimmigrant status
- All other Nonresident alien Exchange Visitors and Cultural Exchange Visitors in J-1, Q-1, or Q-2 nonimmigrant status
Caution! Wages paid to aliens in F-1, J-1, M-1, Q-1, or Q-2 nonimmigrant status who have become resident aliens for tax purposes are subject to FUTA tax under the same conditions that would apply to U.S. Citizens.
For a list of other exempt services, refer to Publication 15 Circular E, Employer’s Tax Guide.
- Federal Unemployment Tax
- Foreign Agricultural Workers
- Internal Revenue Code Section 3306
- Income Tax Regulation 31.3301-1 et seq.
- Publication 15 Circular E, Employer’s Tax Guide
- Publication 51, Circular A, Agricultural Workers Tax Guide
- Publication 926, Household Employer's Tax Guide