Rock the 2025 FPC Exam – Master Payroll Fundamentals with Confidence!

The unemployment tax is governed by the Federal Unemployment Tax Act (FUTA), which establishes a framework for federal and state unemployment tax systems. FUTA imposes a federal payroll tax on employers to fund unemployment compensation for workers who have lost their jobs. This tax is critical as it ensures that qualifying individuals receive financial assistance during periods of unemployment, ultimately supporting the economy by easing the financial burden on those affected.

In context, other taxes mentioned, such as the Social Security tax and the Medicare tax, are governed by different laws: the Federal Insurance Contributions Act (FICA). State income tax is regulated at the state level and is distinct from unemployment taxes, which are specifically geared toward providing unemployment benefits.