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FUTA tax is the US federal unemployment tax, and Canada has nothing with that name. The IRS sets it at 6.0% on the first $7,000 paid to each employee, but most employers get a credit of up to 5.4% and end up at 0.6%. If you run a payroll in Canada, the thing you’re really after is the employer share of Employment Insurance.
What is FUTA tax, in plain terms?
The Federal Unemployment Tax Act funds the US side of unemployment insurance. Employers file Form 940 once a year. The IRS page speaks only to employers, and we saw nothing about a deduction from the worker’s pay, which is the first difference from what Canadians are used to.
The credit works like this. If an employer paid state unemployment tax in full and on time, the IRS lets it knock up to 5.4% off. That leaves 0.6% of the first $7,000, or $42 per employee for the year, against $420 with no credit. A state that hasn’t repaid money borrowed from the federal government can lose part of the credit, so some employers pay more.
Deadlines are simple. Form 940 is due 31 January, or 10 February if every deposit was made on time. Once the running tax passes $500, a deposit is due by the end of the month after the quarter.
Why would a Canadian care about it?
Three kinds of reader land here. Some run a small business with a US employee. Some are moving a payroll across the border. And some just typed the name after seeing it on a US pay stub. If you’re in the first two groups, FUTA is a US filing, and the IRS is the body to ask. We can’t advise on US returns.
For a Canadian employer with staff in Canada, no FUTA is owed. You deal with EI, CPP and income tax instead, and all three go to the CRA through your payroll account (Quebec employers also deal with Revenu Québec for provincial items).
What do Canadian employers pay instead?
The closest match is the employer EI premium. In 2026 the employee rate is 1.63% of insurable earnings up to $68,900. The employer pays 1.4 times that. Both figures are on the CRA’s premium page.
The employer’s premium will be 1.4 times this amount.
EI premium rates and maximums, canada.ca
| 2026 figure | Outside Quebec | Quebec |
|---|---|---|
| Employee rate | 1.63% | 1.30% |
| Employer multiple | 1.4 times | 1.4 times |
| Maximum insurable earnings | $68,900 | $68,900 |
| Maximum employer premium | $1,572.30 | $1,253.98 |
Quebec’s rate is lower because Quebec runs its own parental insurance plan, and that plan has premiums of its own.
Set that against FUTA’s $42. A Canadian employer with one well-paid worker can owe $1,572.30 in EI alone, and that’s before the CPP match. The systems don’t line up. Don’t treat one as a stand-in for the other.
The gap shrinks with pay, because EI is a percentage. For a worker with $30,000 of insurable earnings outside Quebec, the employee premium is $489.00 and the employer’s is $684.60 (1.4 times). That’s still far above $42, since FUTA stops at the first $7,000 of wages.
What does one Canadian paycheque look like?
Take an Ontario employee paid $2,500 every two weeks. Our payroll remittance calculator shows $40.75 of EI held back from the employee, plus $57.05 that the employer adds (the 1.4 multiple). The same page shows CPP of $140.74 held back and another $140.74 from the employer, so the employer share for the period is $197.79, and the full remittance is $753.34.
The employee’s side is on the payroll deductions calculator: $555.55 comes off, leaving $1,944.45. If you’re trying to see what an employee would take home after all that, the take-home pay calculator is the quicker route.
And if someone loses the job, the EI benefit calculator estimates the weekly amount. That’s the payoff for all those premiums.
Mistakes and limits
Mixing the two systems is the big one. Don’t budget for FUTA on a Canadian payroll, and don’t assume a US employer’s 0.6% tells you anything about Canadian costs. The calculators leave out workers’ compensation and other payroll levies, which vary by province.
Another trap is the word “tax” itself. EI premiums are called premiums, and the CRA collects them together with income tax and CPP. If a website tells you a Canadian employer must file “FUTA”, it’s wrong.
Cross-border pay has its own questions: which country’s payroll rules apply to a remote worker, and whether a treaty affects the withholding. We haven’t researched those, and the answer turns on the specifics. A cross-border accountant is the right person, because a wrong guess there can mean two countries asking for the same money.
Is there a Canadian form like Form 940?
Not one annual unemployment form. Canadian employers remit EI, CPP and income tax deductions together on a regular schedule through their CRA payroll account, and report the yearly totals on T4 slips and a summary. We haven’t gone through the remittance schedules here, so check the CRA’s payroll pages for when your business has to remit.
What this page is based on
The FUTA rate, wage base, credit and due dates are from the IRS page on Form 940, read in September 2026. EI rates and maximums are from the CRA page on EI premium rates and maximums for 2026. The payroll examples come from this site’s calculators, which use the same 2026 figures. This site has no link with the IRS, the CRA or any government.
Frequently asked questions
Does Canada have a FUTA tax?
No. FUTA is a US federal tax. Canadian employers pay employer EI premiums and match CPP contributions.
What is the FUTA rate?
The IRS rate is 6.0% on the first $7,000 paid to each employee, with a credit of up to 5.4% for state unemployment tax paid on time.
Do employees pay FUTA?
The IRS page is written for employers, who file Form 940. We saw nothing about a deduction from the worker's pay.
What is the Canadian equivalent?
The nearest match is the employer EI premium, which is 1.4 times the employee rate. For 2026 the employee rate is 1.63% up to $68,900 of insurable earnings.
Who do I ask about US payroll for a Canadian business?
The IRS sets FUTA rules. For a cross-border payroll, a cross-border accountant is the person to ask.
- How Canadian income tax works: brackets and credits
How federal and provincial Canadian income tax stack up, what marginal and average rates mean, and how credits and deductions change your bill