Higher FUTA tax coming?

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in Small Business Tax,Small Business Tax Deduction Strategies

Due to a little-noticed provision, employers in many states may not be able to claim the maximum amount of state unemployment credits to offset 2013 liability for federal unemployment tax (FUTA).

Employers must pay FUTA tax at a rate of 6.0% on the first $7,000 of covered wages paid to each employee during a calendar year. But the tax is offset by credits of up to 5.4% for amounts paid to a state unemployment insurance fund. Thus, the effective FUTA tax rate for most employers is 0.6%. However, if a state defaults on its repayment of loans from the federal fund, the usual credit is reduced.

At this point, employers in 17 states are at risk. The final outcome will be announced mid-November.

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