7.1 Employer FICA Match, FUTA & SUTA

Why the employer layer is a different exam skill

Chapter 6 of this independent OpenExamPrep guide taught who is an employee, wage-hour / FLSA overtime, Form W-4 records, and employee FIT and FICA withholding. AIPB's Mastering Payroll workbook then turns to the employer cost: the FICA match, Federal Unemployment Tax Act (FUTA) tax, and state unemployment tax (SUTA). Those amounts do not come out of the employee's net pay. They are the firm's expense, they sit in liability accounts until deposited, and they are the numbers that make a payroll that "balanced to the net check" still understate cost of labor.

AIPB Part 2, Test 1 is the one-hour Prometric payroll sitting (passing grade 75%). Items in that hour mix employee withholding with employer tax. If you only remember 7.65% from the employee side, you will miss the wage-base cap on the employer OASDI match, invent an employer Additional Medicare match that Topic 751 says does not exist, or treat FUTA as 6.0% of gross payroll. This section is independent OpenExamPrep teaching for those employer computations. It is not an AIPB publication and does not claim official approval, review, or partnership.

Sources for the locked 2026 figures: IRS Topic 751 (Social Security and Medicare withholding rates; page reviewed or updated 20-Jan-2026), IRS Topic 759 (Form 940 filing and FUTA deposits; page reviewed or updated 25-Feb-2026), and Publication 15 (Circular E), Employer's Tax Guide (2026) for FUTA mechanics that Topic 759 summarizes. SUTA never lives in those IRS pages as a single national rate—state workforce agencies publish each employer's rate and wage base.

Employer FICA is a match, not a copy of every employee line

Federal Insurance Contributions Act (FICA) tax has two employer pieces that do match the employee statutory rates, and one employee-only piece that does not.

Employer FICA formula for 2026:

Employer FICA = 6.2% × min($184,500, FICA wages) + 1.45% × all FICA wages.

Do not add 0.9% × max(0, wages − $200,000) to the employer total. Chapter 6 already taught that Additional Medicare line as employee withholding. The bookkeeping consequence on the employer side is simple: credit Additional Medicare Tax Payable only for the amount withheld from the employee, and do not debit Payroll Tax Expense for that 0.9%.

Check the OASDI cap the same way SSA publishes it: 0.062 × $184,500 = $11,439.00. After that dollar of FICA wages, both the employee and the employer stop OASDI on further wages from that employer. Medicare does not stop.

Worked annual employer FICA — North Finch Studio (2026)

North Finch Studio is a small production firm. Use these annual FICA wages; they are not the Harbor Street / Maya figures from Chapter 6.

Elena. 0.062 × $62,400 = $3,868.80. 0.0145 × $62,400 = $904.80. Combined check: 0.0765 × $62,400 = $4,773.60. Under both thresholds, 7.65% is a legal shortcut. It is not a legal shortcut once wages pass $184,500.

Marisol. A 7.65% reflex on $195,000 produces 0.0765 × $195,000 = $14,917.50. That wrongly keeps charging 6.2% on the $10,500 above the wage base (0.062 × $10,500 = $651.00 of phantom OASDI). Correct OASDI is 0.062 × $184,500 = $11,439.00. Medicare is 0.0145 × $195,000 = $2,827.50. Employer FICA = $14,266.50. She is still under $200,000, so no Additional Medicare withholding and no temptation to "match" it.

Drew Solis (contrast employee, $210,000 FICA wages). Employer OASDI remains $11,439.00. Employer Medicare = 0.0145 × $210,000 = $3,045.00. Employer Additional Medicare = $0. Employer FICA = $14,484.00. The employee also has Additional Medicare of 0.009 × ($210,000 − $200,000) = $90.00 withheld. That $90.00 is not an employer tax. If a stem asks for employer payroll tax on Drew and someone adds $90.00, the item is wrong even though the withholding itself is required.

Mid-paycheck employer match when the OASDI base is crossed

Before a December 2026 check, Marisol's FICA wages are $183,000. This check is $6,000. Remaining OASDI wages = $184,500 − $183,000 = $1,500. Employer OASDI this check = 0.062 × $1,500 = $93.00. Employer Medicare this check = 0.0145 × $6,000 = $87.00. Employer FICA this check = $180.00. The other $4,500 of the check is Medicare-only for FICA. A 7.65% shot on the whole $6,000 ($459.00) fails the same way the annual 7.65% shot on $195,000 failed.

FUTA is annual, per employee, and usually 0.6%—not 6.0% of the payroll register

Topic 759: the FUTA tax rate is 6.0% and it applies to the first $7,000 you paid to each employee as wages during the year (the FUTA wage base). The $7,000 is per employee, per year, not per paycheck and not a firm-wide cap.

If you paid into state unemployment funds in full, by the Form 940 due date, and on the same wages that are FUTA-taxable, and the state is not a credit-reduction state, you generally take a credit of up to 5.4%. Topic 759: if you are entitled to the maximum 5.4% credit, the FUTA rate after credit is 0.6%. Bookkeepers memorize 0.6% of the first $7,000 = $42.00 per employee who reaches the wage base. The statutory 6.0% is still the starting rate on Form 940; the credit is how most solvent, timely state-UI payers get to 0.6%.

Full-credit FUTA formula:

FUTA for one employee = 0.006 × min($7,000, that employee's FUTA wages).

Without any credit, the same employee at or above $7,000 would be 0.06 × $7,000 = $420.00. Confusing $420 with $42 is a standard payroll-test trap. Credit-reduction states (Department of Labor publishes the list each year) reduce the 5.4% credit, so net FUTA is higher than 0.6% on wages in that state; those employers complete Schedule A (Form 940). This guide does not invent which states are on the current credit-reduction list—look up the DOL/IRS list for the Form 940 year if a stem names a state.

Who must file Form 940 (general test, Topic 759). You are generally subject to FUTA and must file Form 940 if you paid wages of $1,500 or more to employees in any calendar quarter of this year or last year, or you had one or more employees for some part of a day in 20 or more different weeks this year or last year. Household and agricultural tests differ; Publication 15 section 14 covers those. Partners in a partnership are not counted as employees for the 20-week test.

Worked FUTA — same five North Finch people, full 5.4% credit

Elena does not pay 0.006 × $62,400. Once her FUTA wages hit $7,000, later 2026 wages are not FUTA-taxable. Tessa never reaches $7,000, so her FUTA is 0.006 × $4,200 = $25.20, not $42.00.

Deposits (Topic 759), separate from Form 941 deposits. Although Form 940 is annual, you may have to deposit FUTA during the year. If FUTA liability is more than $500 for the calendar year, you must deposit at least one quarterly payment. If a quarter's FUTA (including amounts carried forward) is $500 or less, carry it forward. When the cumulative amount is more than $500, deposit by the last day of the month after the quarter. Fourth-quarter liability plus undeposited earlier amounts that is still $500 or less may be deposited or paid with Form 940 by January 31. Deposits are electronic funds transfer (EFTPS or another IRS electronic method). These FUTA rules do not use the monthly/semiweekly Form 941 lookback schedule in Section 7.2.

North Finch's $193.20 never clears $500, so the studio can pay FUTA with Form 940. Oakline Goods, a larger shop used only for this deposit illustration, has 20 employees who each receive at least $7,000 of FUTA wages in Q1 2026. Q1 FUTA = 20 × $42.00 = $840.00. Because $840.00 > $500, Oakline deposits $840.00 by April 30, 2026. Those 20 employees are then at the FUTA wage base, so Q2 FUTA is $0 unless a new hire starts accumulating a new $7,000.

SUTA is state law sitting next to FUTA, not a federal percentage

SUTA (also called SUI or state unemployment insurance) is the tax the state charges employers to fund unemployment benefits. The rate is typically experience-rated: a new employer receives a new-employer rate; later years move with the employer's claims history. The taxable wage base is also state-specific. Some states use a base near the federal $7,000; others use a much higher base. There is no nationwide SUTA rate in Topic 759 or Publication 15. A stem that says "SUTA is 5.4% everywhere because that is the FUTA credit" is mixing the maximum FUTA credit with the actual state tax. The 5.4% figure is the ceiling on the federal credit, not a command that every state charge 5.4%.

Illustration only — not a federal rate. Suppose North Finch's state assigns this employer a 2.7% SUTA rate on the first $14,000 of SUTA wages for 2026. Those two numbers are this employer's state assignment for the example.

If the next item moves the firm to a different state, discard 2.7% and $14,000. Look up that state's base and the employer's assigned rate. Multi-state wages can require SUTA in more than one state and can put Form 940 on Schedule A as a multi-state filer even when no credit reduction applies.

Exam traps. (1) Matching Additional Medicare 0.9%. (2) Employer OASDI on wages above $184,500. (3) Capping employer Medicare at $184,500. (4) FUTA = 6.0% of all gross wages. (5) FUTA = 0.6% of all gross wages after the employee passed $7,000. (6) Treating $42.00 as FUTA for a $4,200 part-year hire. (7) Using one invented SUTA percentage as if it were federal. (8) Depositing FUTA on the Form 941 semiweekly calendar. Section 7.2 is Forms 941/940/W-2 and the 941 deposit schedules; Section 7.4 is the journal entries that post the amounts computed here.