A weekly look at Wyoming business questions from the Wyoming Small Business Development
Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance
programs at the University of Wyoming.
By: Leonard Holler, WSBD regional director
"What is Federal Unemployment Tax and do I have to pay it? I already pay my unemployment
taxes to the state." George, Rock Springs.
You probably do. The Federal Unemployment Tax Act, or FUTA directs both the states
and federal government to run the unemployment tax program for the nation.
The program provides payments to workers who have lost their jobs, such as what the
nation is experiencing now during this recession.
The states create the actual employment insurance systems and the federal government
pays the administration costs of state programs. It is a joint program and a small
business owner's first responsibility is to the state program. Payments made to the
state program qualify you for a credit against the federal tax. This tax, just like
the state unemployment tax, is the sole responsibility of the employer.
Some employees may be exempt, or if you do not meet the requirements, the company
may be exempt from the tax. You should check the requirements by referring to IRS
publication 15 for exemptions and limitations. For example, special rules are in place
for farm workers. The tax rate is 6.2 percent and is figured on the first $7,000 of
each employee's wages. If mall business owners have paid into the state fund on a
timely basis they can take a tax credit of 5.4 percent of the total FUTA wages against
the federal tax rate. That makes the actual tax rate only 0.8 percent.
The tax is reported on Form 940 and is due Jan. 31, for the previous tax year, however,
tax deposits may need to be paid on a quarterly basis depending on total FUTA tax
liability. Deposit dates are April 30, July 31, Oct. 31, and Jan. 31, following each
calendar quarter. If your accumulated unpaid tax at the end of any calendar quarter
is $500 or less, you do not have to make a deposit, but instead, can add it to the
next quarter's tax liability. The deposit rules are also changing after Dec. 31. Business
owners should be ready to make electronic tax payments for 2011 and beyond.
A blog version of this article and an opportunity to post comments is available at
http://www.wyomingentrepreneur.typepad.com/blog/.
The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming
Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194,
e-mail wsbdc@uwyo.edu or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.
