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FEDERAL UNEMPLOYMENT TAX ACT (FUTA)

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Social Security legislation affecting labor costs and payroll records. Unlike the FEDERAL INSURANCE CONTRIBUTION ACT (FICA), which is strictly a federal program, FUTA provides for cooperation between state and federal governments in the establishment and  administration of unemployment insurance. Under FUTA, an employer must pay an unemployment insurance tax to the federal government. While the federal act requires no employee contribution, some states levy an unemployment tax on the employee.