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By Howard Perlman
Employers in eight jurisdictions were assessed Federal Unemployment Tax Act credit reductions for 2014, down from 14 jurisdictions for 2013, the Labor Department said in a notice released Nov. 10.
Employers are assessed a higher federal unemployment tax rate than the standard effective rate of 0.6 percent on wages paid for work performed in or otherwise attributable to credit-reduction jurisdictions because the tax credit they can apply on such wages is less than the maximum credit of 5.4 percent.
Credit-reduction percentages vary among jurisdictions based on the number of consecutive years that they have possessed a loan balance from the federal unemployment account and whether they have successfully applied with the Labor Department for credit-reduction relief.
An extra type of FUTA credit reduction, the benefit-cost rate (BCR) add-on, was assessed for 2014 as a historic first because this is the first year for which a jurisdiction has possessed a federal unemployment loan balance on Jan. 1 of at least five consecutive years but did not acquire relief from the BCR add-on. When a BCR add-on applies, it is assessed in addition to the general FUTA credit reduction, which increases by increments of 0.3 percent for each consecutive year, starting with the second year, that a jurisdiction had a federal unemployment loan balance on Jan. 1.
Many employers' unemployment tax costs also are to increase because of increases to state unemployment taxable wage bases that are to occur for 2015, although some states' wage bases are to decrease.
Although a BCR add-on was to apply for each of the eight credit-reduction jurisdictions for 2014, seven of the jurisdictions successfully applied for a fifth-year waiver that enabled them to avoid assessment of a BCR add-on, but not the general FUTA credit reduction.
Employers in Connecticut, which did not apply for credit-reduction relief, were assessed a general credit reduction of 1.2 percent and a BCR add-on of 0.5 percent. The combined credit reduction of 1.7 percent, the highest ever to be assessed, increases 2014 federal unemployment tax costs for employers in the state by up to $119 for each employee.
A general credit reduction of 1.2 percent, which increases federal unemployment tax costs by up to $84 for each employee, applies for 2014 for employers in California, Kentucky, New York, North Carolina, Ohio and the U.S. Virgin Islands.
Employers in Indiana were assessed a general credit reduction of 1.5 percent for 2014, which increases their federal unemployment tax costs by up to $105 for each employee. The reduction of 1.5 percent is the highest general credit reduction ever assessed.
South Carolina, which has possessed a federal unemployment loan balance on Jan. 1 of six consecutive years, also was to be a credit-reduction jurisdiction for 2014 but the state successfully applied for a credit-reduction avoidance for the fourth consecutive year.
The six credit-reduction jurisdictions for 2013 that are not credit-reduction jurisdictions for 2014 because they repaid federal unemployment loan balances are Arkansas, Delaware, Georgia, Missouri, Rhode Island and Wisconsin.
Credit-reduction percentages for 2014 are to be reaffirmed by the Internal Revenue Service on the 2014 Form 940 Schedule A, Multi-State Employer and Credit Reduction Information. The 2014 Form 940 and its Schedule A are to be released by early December.
Additional amounts due because of credit reductions are to be paid by Jan. 31, 2015. Employers are to file the 2014 Form 940 by that date or by Feb. 10, 2015, if their federal unemployment tax was timely paid.
Increases to unemployment taxable wage bases for 2015 have been acknowledged by 16 states: Colorado, Iowa, Kansas, Kentucky, Massachusetts, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont and Washington.
Florida and Oklahoma are to decrease their unemployment taxable wage bases for 2015.
In the accompanying wage base comparison chart, increased wage bases are bold and decreased wage bases are italicized.
|Alabama||$ 8,000||$ 8,000|
|District of Columbia||9,000||9,000|
|Rhode Island||20,600; 22,100**||21,200; 22,700**|
* Wage base to be announced.
** Experienced Rhode Island employers that are assessed the maximum unemployment tax rate are assigned a higher wage base.
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