 In this presentation, we will take a look at the calculation for federal unemployment tax or FUTA. We're here on our payroll register where we have our two employees, we have the regular pay, we have the total earnings, and now we're looking for the FUTA earnings and we want to make sure that we know the difference between the total earnings and the different types of earnings that we could have or the different adjustments to earnings in order to use them to calculate our taxes. For example, the FIT may differ if there's a cafeteria plan. For example, the OASDI or Social Security has this cap on it. So if anybody is over that amount, then it will differ from the total earnings and the Medicare and Social Security could differ if there's something like a cafeteria plan on it as well. FIT could differ if there's a retirement plan as well as a cafeteria. The FUTA wages will differ when we have this cap of 7,000. It's important to note that that 7,000 is very low. So this is kind of an unusual tax in that case because it's a flat tax but up to this very low cap which most people will hit sometime probably in the first quarter. So most employees will get to this cap at some point. So we need to be very careful when we do the payroll that when an employee gets to that cap we don't go over it. Now if we look at these two wages, we can see 756 and 3,653 for this current time period. We can't tell from those numbers whether or not they've hit the cap though because we're in week 10 and we need to know cumulative wages not just for this time period for this test of the cap. So to do that we'd have to go to the earnings records. So in the earnings records we can look at this first employee and we can look at the FUTA wages here at 6,808 for our first employee and if we do our subtraction problem then we're looking here. If we're doing 7,000 minus 6,808.5 that's $191. So that means if that $191 is less than the wages they would have gotten this time period then we're going to go with the lesser amount. The second employee here is clearly already over the 7,000 so we're not going to have anything included here for the FUTA wages. So if we go back to our FUTA wages then we have 191 only even though the earnings were 756.50 and there's going to be no FUTA wages for our second employee for PAM. That'll give us a total of 191. The FUTA tax then will be 191.5 times 0.006. Now remember 0.006 is going to be quite low. We've got 191.5 times 0.006 or 6 percent. Move the decimal two places to the left. So that gives us about 1.15 and that's going to be the total 1.15. Remember that this rate is pretty much the effective rate for most circumstances because most circumstances will have a state which will have a SUTA tax which will lower the FUTA tax down to this percentage. So for practical purposes this is typically the percent we will use. If you see the FUTA percent however listed out or read the FUTA percent or look it up then oftentimes you'll get the full FUTA percent minus the deduction for SUTA which will then result in this number here. So just be careful when you're looking up the rates for FUTA.