 Hello, in this lecture we will define Federal Unemployment Tax Act or FUTA. According to Fundamental Accounting Principles, Wild 22nd Edition, the definition of Federal Unemployment Tax Act FUTA is, Payroll taxes on employers assessed by the federal government to support its unemployment insurance program. When we're thinking about FUTA, we are thinking about a form of payroll taxes. However, we're not talking about payroll taxes that are going to be withheld from the employees. These are payroll taxes that only the employer pay. However, they pay those taxes, the FUTA tax, based on employee wages. So what we're going to do is we're going to calculate the employee wages. And then we're typically going to have a cap that is fairly low, meaning all wages for all employees up to the cap of 7,000 for each employee or a cap thereabouts, which is low enough that most employees will actually hit that like in the first or second quarter. And then we're going to take that and multiply it times a flat rate because it's going to be the FUTA tax is going to be far less than a tax such as the FICA taxes of Social Security and Medicare. The reporting is not quarterly for the FUTA taxes. It's only going to be once a year. So the 940 here is where we report the FUTA tax. Don't get it confused with the 941 where we report the FICA tax, Social Security, Medicare, as well as the federal income tax withheld from the employees. So here's the calculation for the FUTA tax. Basically what we're going to do is we're going to calculate what the FUTA wages are. And remember that the FUTA wages have an exemption for wages that are above the cap for each employee of the 7000. So the FUTA wages for all the employees is going to be much different because of that cap than total wages. We will multiply the FUTA wages times the rate, which again is a relatively low rate for FUTA. And then we're going to compare that tax liability to what has actually been reported. So like reporting our income on the 1040, note that it's usually more of an information statement, meaning we have already withheld the money in the format of withholdings for our 1040. And now we're reporting that on the 1040, saying here's the liability we now know. Here's the amount that we withheld. And hopefully we have a refund in terms of the 1040. The same will happen for FUTA, except for the fact that it should work out exactly correctly because FUTA is more of a flat tax. We can easily calculate that. However, this is more of an informational form saying here's the tax liability based on this calculation and here's what we actually paid throughout the year. And we should have no money owed or received, however, of course, if there's some type of difference, then we will have money owed and received at the time of reporting the 940. The end.