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. Here are some examples on how your business could be responsible for more federal unemployment tax later this year:
Arkansas, California, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, U.S. Virgin Islands, Virginia and Wisconsin (state list as of January 1, 2011).
During the first week of December Payce will determine if your state is in “credit reduction” status and will advise you of any additional amounts owed once the November 10th due date establishes which states will still owe the IRS outstanding loan balances.