CSLB Contractor's Law & Business Practice Exam

To whom does an employer pay FUTA tax?

1. State Revenue Agency

2. Internal Revenue Service

3. Department of Labor

4. Social Security Administration

The correct answer is: Internal Revenue Service

The Federal Unemployment Tax Act (FUTA) tax is specifically paid to the Internal Revenue Service (IRS). This tax is used to fund state unemployment insurance programs and provides a federal backstop of support to workers who lose their jobs. Employers are required to pay this tax on employees’ wages, and the contributions are reported and submitted directly to the IRS. The other options involve different aspects of taxation and labor regulations. The State Revenue Agency manages state-level taxes, which may include state unemployment taxes but not FUTA itself. The Department of Labor oversees a variety of employment-related issues but does not collect FUTA tax. The Social Security Administration manages Social Security contributions, which are separate from unemployment taxes. Each of these agencies has its specific role, but for FUTA tax payments, the IRS is the correct agency to which employers must remit these taxes.