SOUND THE ALARM!
If you’re a business owner that does business in America, you might be paying higher Federal Unemployment Tax Act (FUTA) taxes at year-end and might not even know it. Did you know
Since I’m on a short time frame and the IRS has been so nice to add a video of Scott that there are 18 states including the Virgin Islands that are required to pay an additional FUTA tax? If your unaware, your going to want to watch the video and read the links that are provided to you.
Scott Mezistrano, CPP, a Program Analyst with the IRS’ Employment Tax Policy to explain the FUTA Credit Reduction background.
States with 2013 Federal Unemployment Tax Act (FUTA) Credit Reductions
The United States Department of Labor has identified the states that are subject to FUTA credit reduction for 2013. They are:
Employers in the following states will be subject to a reduction in FUTA credit on their IRS Form 940 for 2013.
-These states had Title XII advance balances on January 1 of at least two consecutive years and on November 10, 2013, and di not qualify for credit reduction avoidance.
Source: U.S. Department of Labor - http://workforcesecurity.doleta.gov/unemploy/docs/reduced_credit_states_2013_final.xls
An employee works for ABC Company beginning in January 2012, receiving wages of $60,000 for the year. ABC Company’s FUTA tax due on the individual’s wages paid in 2012 would normally be $42 ($7,000 x 0.6%). If the employee worked in California, which is a credit reduction state for the second consecutive year, the total FUTA tax would be $84 ($7,000 x (0.6% + 0.3% + 0.3%)).
What to Expect for 2013
The FUTA tax rate remained at 0.6% of wages paid, up to the taxable wage limit of $7,000, or $42 per employee per year. Employers in the credit reduction states identified above have seen an increase in the FUTA taxes for 2013 (payable in January 2014).
California Employers can learn more about the FUTA tax increase for 2013 by clicking here.
If you are an employer that falls in on this list, you should visit your local state unemployment website to learn more about the FUTA Tax Increase.
About Pinnacle Employee Services
Pinnacle Employee Services is dedicated to assisting businesses with increased compliance requirements resulting from the rapidly evolving legislation. Our goal is to minimize your administrative burden across the entire spectrum of payroll, tax, HR and benefits, so that you can focus on running your business.