Compliance with Employment Tax

A Foreign entity planning to have employees in the United States should comply with employment taxes at the Federal Level. Generally, foreign employers should withhold income taxes from their U.S.-based employees. In doing so, they should abide by the following taxes:

Federal unemployment tax (FUTA)

The Federal Unemployment Tax (FUTA) is a federal law that imposes a tax to fund benefits for individuals who lose their jobs.

FUTA tax is a specified percentage of the wages an employer pays to its employees. As of 2024, the FUTA tax rate is 6.0%. It is applicable to first $7,000 paid to each employee.

Federal Insurance Contributions Act (FICA)

The Federal Insurance Contributions Act (FICA) funds Social Security and Medicare and is paid for by employers and employees. It is based on a U.S. federal payroll tax calculated as a percentage of wages.

Both Social Security and Medicare taxes are split equally between employees and employers. Here’s a breakdown of that percentage:

• Both employers and employees pay Social Security taxes at 6.2%
• Both employers and employees pay Medicare taxes at 1.45%

Employers must also withhold an additional 0.9% Medicare tax if an employee earns over $200,000 or $250,000.