Federal Unemployment Tax Questions January 2012
Why did I pay more federal unemployment taxes this year?
Employers in many states, including Wisconsin, noticed that their 940 (federal unemployment taxes) were higher for 2011 than they had been in the past. This is because many states, including Wisconsin, have taken loans to help pay for unemployment benefits. Wisconsin has had an outstanding loan balance for the past two years. As a result, Wisconsin employers were required to pay an additional 0.3% on taxable FUTA wages to help pay back this loan. This resulted in employers paying up to $21.00 extra per employee.
Why this additional tax was called a credit reduction?
The federal unemployment tax rate is 6.0%. Employers working in states that are required to pay state unemployment taxes can qualify for a credit on their FUTA taxes of up to 5.4% resulting in a tax rate of 0.06%. This is the credit that is being reduced because the states have outstanding unemployment loans that are required to be paid back.
Will I owe additional taxes again in 2012?
The tax rate increases by 0.03% per year that the loans are outstanding. Wisconsin is estimating that the federal loans will be paid by 2014 so employers should expect to pay an additional 0.06% on their 940 (federal unemployment taxes) for 2012. That is up to $42.00 extra per employee.
Last September, I had to pay an additional amount to the state for a “Special Assessment”. What was this for and will I have to pay it in 2012 too?
The “Special Assessment” that was charged by WI DWD is to pay for the interest that is charged on the federal loan. These will continue until the loan is paid off. You will be receiving a bill in August and it will be due sometime in September.
If you have any questions on any of these taxes, please feel free to give us a call.
Checkpoint/WI DWD Website