Important Notice to Wisconsin Employers:
Reduction in Federal Unemployment Tax Credit
"Taxable" employers are subject to a federal unemployment tax (FUTA), which is currently 6.0% of the first $7,000 of employee earnings. FUTA allows a 5.4% tax credit for employers in good standing with their state unemployment program so most employers have a net FUTA rate of 0.6%. However, the net rate will increase in each of the next three years because of automatic reductions in the tax credit.
The 5.4% tax credit will decrease 0.3% in the first year and an additional 0.3% in each succeeding year until the federal loans are fully repaid. Once the federal loans are repaid, the tax credit will return to 5.4% and no additional taxes will be assessed. Wisconsin currently expects the reserve fund to rely on federal loans through 2014.
"Taxable" employers could expect, when compared to their 2011 payment, an additional assessment of:
- 0.3% of the first $7,000 of 2011 taxable employee earnings payable in
or up to $21.00 per employee;
- 0.6% of the first $7,000 of 2012 taxable employee earnings payable
in January 2013,
or up to $42.00 per employee; and
- 0.9% of the first $7,000 of 2013 taxable employee earnings payable
in January 2014,
or up to $63.00 per employee.
The additional federal tax revenue generated by reductions in the tax credit will be used to pay down the federal loan balance. Current projections indicate that federal loans will be repaid by November, 2014. If they are not, the state budget provides for a loan of up to $50 million to pay off any loans still outstanding at that time. If all loans are paid off at that point, employers will pay .6% instead of 1.8% in FUTA tax. This will save employers $84 on an employee earning at least $7,000 annually. A typical business with 100 employees would save $8,400 on the FUTA tax due in January 2015.
Questions can be directed to the IRS at (800)-829-0115. The 2011 Federal Employer's Annual Federal Unemployment (FUTA) Tax Return (Form 940 and Instructions) will be available at: http://www.irs.gov/app/picklist/list/formsInstructions.html
The above information on FUTA is subject to changes in federal law. UI will update employers annually.