FUTA Tax — Will your business owe more in taxes this year than expected?
The Federal Unemployment Tax Act was established well over 30 years ago with the intention of providing monetary support to people who involuntarily lost their jobs, and was implemented to hold employers accountable for their workforce in terms of hiring and firing. The FUTA tax is due each year at the current contribution rate of 6% less an offset of 5.4% FUTA tax credit if an employer has paid their state unemployment taxes on time and in full. Each quarter an employer is also responsible to pay their contribution rate assessed by their state unemployment division depending on where their employees work. Employers may have more than one state SUTA tax to pay depending on the location of their workforce.
The new rate of 6% on the federal taxable wage base of $7,000 was started on July 1, 2011. It is important to understand how the offset credit of 5.4% is necessary in determining whether your business will owe more money.
Payroll Tax Cuts – will they expire as of February 29th?
The continuing battle between Republicans and Democrats in Congress goes on without a resolution on how to pay for the extension of payroll tax cuts for workers. As of this writing Congress needs to move quickly or the payroll tax (also known as FICA) would increase by 2 percentage points. If the extension expires, the payroll tax rate would return to 6.2%, translating to about $1,000 less for a wage earner making $50,000 per year.
Along with the tax cut going away there could also be a decrease in the maximum number allowable unemployment weeks paid to jobless individuals cutting down to 54, from 99 weeks.. If the extension is not renewed, there is also a proposed 27 percent cut in Medicare reimbursement to doctors.
Currently the good news is that the jobless rate has dropped from mid 9’s to now 8.3 percent in a slowly recovering economy.
As your new tax year begins it is a good idea to check on your filing frequencies for your federal 941 and state tax withholdings. Every year you are assigned payment frequencies depending on your prior year’s payroll gross and taxes withheld.
If your company has experienced a dip in total payroll and lower employment over the past few years, you may have had your tax payment requirements moved to a manageable monthly remittance versus a per pay frequency.
According to the Affordable Care Act any employer-sponsored group health plans must track the value of employer provided health care costs particularly for larger sized employers. Did you know that employers who are filing fewer than 250 W2 forms are not required to report on the 2012 W2 at this time? IRS Notice 2012-69 restates and clarifies the guidance previously provided last year. The reporting is for informational purposes only and will show employees the value of their health care benefits. The value of the employer contribution amount continues to be excluded from the employees’ income and is not taxable.
Payce is available to assist you with your tracking on a per pay basis. Give your Client Service Representative a call today to discuss your tracking options.
Consult the IRS website for this topic at: irs.gov/newsroom/article/0,,id=237894,00.html