Under the provisions of the American Federal Unemployment Tax Act (FUTA), a Federal tax is levied on employers covered by the Unemployment Insurance program at a current rate of 6.0% on wages up to $7,000 a year paid to a worker. The law, however, provides a credit against federal tax liability of up to 5.4% to employers who pay state taxes timely under an approved state UI program. Accordingly, in states meeting the specified requirements, employers pay an effective Federal tax of 0.6%, or a maximum of $42 per covered worker, per year. The credit against the Federal tax may…
Posts published in “Unemployment Tax”
Under the provisions of the American Federal Unemployment Tax Act (FUTA), a federal tax is levied on employers covered by the Unemployment Insurance program at a current rate of 6.0% on wages up to $7,000 a year, paid to a worker. The law, however, provides a credit (basically a discount) against federal tax liability of up to 5.4% to employers who pay state taxes timely under an approved state UI program. Therefore, the employer pays an effective federal tax of 0.6% or a maximum of $42 per covered worker, per year. During times of high unemployment claims, a state may…
Employers who operate in more than one state need to understand the complexity of determining the proper state location for reporting unemployment taxes for each employee. In this article, we will cover the rules and factors utilized by all states to report and pay taxes, which we can break down to a four-step process. We will not cover state income tax here. That is a topic in itself and will be covered in a future article. Before we start, let’s cover the simple scenario. Employee lives in Florida, but each day drives and crosses state lines to work in Georgia…