CSLB Contractor's Law & Business Practice Exam

What is the typical frequency of FUTA tax deposits made by most employers?

1. Monthly

2. Quarterly

3. Bi-Annually

4. Annually

The correct answer is: Quarterly

The correct answer is that most employers are required to make FUTA tax deposits quarterly. The Federal Unemployment Tax Act (FUTA) is a federal law that imposes a tax on employers to fund unemployment compensation. While the exact frequency of future tax deposits can vary depending on the amount of tax owed or the employer's specific circumstances, quarterly deposits are generally expected for the majority of employers. FUTA taxes are calculated annually based on payroll, and if the tax liability for the quarter is $500 or more, the employer must make a deposit. The quarterly deposit schedule allows employers to manage their payments more regularly rather than waiting for an entire year, which helps maintain cash flow and adherence to tax regulations. Other options are related to different deposit frequencies that may not apply to FUTA. Monthly deposits, for instance, may apply to employers with high tax liabilities under the Federal Insurance Contributions Act (FICA), but they are not the standard for FUTA. Bi-Annual and annual deposit frequencies do not align with the IRS requirements for FUTA, as they do not allow for timely remittance of unemployment taxes. Thus, quarterly is the typical expectation for most employers regarding FUTA tax deposits.