North Carolina Building Contractor License Practice Exam

Who is required to pay Federal unemployment tax?

1. The contractor

2. The employee

3. The employer

4. The state

The correct answer is: The employer

The employer is required to pay Federal unemployment tax as stipulated under the Federal Unemployment Tax Act (FUTA). This tax is designed to fund unemployment benefits for workers who lose their jobs. Although employers may sometimes pass on the costs to employees indirectly through lower wages, it is the employer's responsibility to calculate, withhold, and remit this tax to the federal government. The Federal unemployment tax is not deducted from the employee's wages; thus, employees do not pay this tax directly. While contractors may have related obligations regarding other forms of taxation and employee benefits, the requirement to pay FUTA specifically falls on the employer. The state is not responsible for federal unemployment taxes, as they have their own systems and regulations regarding unemployment insurance at the state level.