(PRWEB) January 14, 2013
Over the last several years unemployment claims have been on the rise. As a result, many states have depleted their Unemployment Insurance (UI) Trust Funds and have had to take Federal Unemployment Trust Fund loans in order to pay the residents of their states UI benefits.
The Federal Unemployment Tax Act (FUTA) levies a federal tax on employers covered by a state’s UI program, with the standard being 6.0% on the first $7,000 of wages subject to FUTA. Generally, employers then receive a credit of 5.4% when they file their Form 940, resulting in a net FUTA tax rate of 0.6% (6.0%-5.4%=.6%).
The FUTA tax creates the Federal Unemployment Trust Fund, administered by the United States Department of Labor. When states deplete their own UI Trust Funds due to high unemployment they must then borrow from the Federal Unemployment Trust Fund. As with any “loan”, these funds must be repaid.
Georgia has relied on a federal loan to pay regular Unemployment Insurance (UI) benefits for more than two straight years. All employers in the state of Georgia will now see an increase in their FUTA taxes filed on Form 940 in January 2013 for wages paid to their workers in 2012. The total .6% reduction of credit on the FUTA rate will result in a total net FUTA tax rate of 1.2% [5.4% credit - .6% credit reduction= 4.8% credit; thus 6.0% FUTA tax – 4.8% credit = 1.2% total FUTA rate after credit rather than the traditional .6%] thus resulting in an additional $42 being paid in FUTA taxes per employee, with the total amount jumping up from $42 to $84 . The .3% increase may continue per year until the loans by the state are repaid to the Federal Government.
Georgia is not the only state with the outstanding loans and FUTA tax credit reductions to repay loans.
As a client of HR Strategies, what does this mean for you?
As always, we are here to consult and help manage our clients’ UI claims. By doing so, as partners, we are helping reduce the number of eligible unemployment claims, thus reducing UI taxes.
Information may also be found at: http://www.irs.gov/uac/Form-940,-Employer's-Annual-Federal-Unemployment-(FUTA)-Tax-Return
About HR Strategies
HR Strategies provides the customizable HR solutions (including but not limited to payroll, benefits, workers compensation, tax administration, regulatory compliance, HR consulting, training solutions) and expertise of a large corporation's personnel department in an affordable and effective solution. HR Strategies enables clients to reclaim time, stabilize and reduce labor costs, and stay compliant with government regulations.
Read the full story at http://www.prweb.com/releases/2013/1/prweb10308626.htm.
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