As I wrote about in a prior post which can be accessed here, there are many states which will have an additional tax amount due for federal unemployment tax (FUTA). Although the rate is 6%, states can reduce that amount by 5.4% if paying their state unemployment tax leaving an effective tax rate of only .6%. But for employers in states that did not pay back their loans to the federal government, this credit is reduced by the percentage set by the Department of Labor. This reduction is .3% for each year the loan has not been repaid, up to 1.5%.
The final list of states and rates was released and is as follows:
| Arkansas | 0.9% |
| California | 0.9% |
| Connecticut | 0.9% |
| Delaware | 0.6% |
| Georgia | 0.9% |
| Indiana | 1.2% |
| Kentucky | 0.9% |
| Missouri | 0.9% |
| New York | 0.9% |
| North Carolina | 0.9% |
| Ohio | 0.9% |
| Rhode Island | 0.9% |
| Virgin Islands | 1.2% |
| Wisconsin | 0.9% |
If you are currently calculating your own payroll, you will need to multiply this rate by each employee’s wage up to the $7000 maximum limit. If your employee earned at least $7000 and is at a .9% reduction, that means there is an additional $63 due for that employee. If they made less than the wage limit, take their total salary and multiply by the rate to find how much is owed for them. You must calculate this rate for each employee on their wages up to the $7000 wage limit and total up the additional amount due for each employee. This amount will need to be reported on line 11 on page one of the 940 return as well as on the Schedule A (if you have employees in more than one state, each state must have the amount due listed).
If you are using QuickBooks for payroll processing, be aware that you will most likely have to manually adjust your file in order to accurately pay this tax. Although QuickBooks calculated the tax due on the 940 last year, it did not automatically adjust the liability account. To create the liability in your file, you must do the following:
- Go to the Employees Tab
- Go to Payroll Taxes and Liabilities
- Choose Adjust Payroll Liabilities
- Enter the effective date as 12/31/13
- Choose adjustment is for company
- For item enter Federal Unemployment
- Enter the amount due
- For accounts affected, choose liability and expense
Once you save this adjustment, you should see it in the pay liabilities window. Proceed as usual to pay the tax due.
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