Budgeting for 2013 FUTA Payments

December 12th, 2012

The “standard” current FUTA tax rate is 0.6%. However, the rate could be higher under certain circumstances. When a state lacks the funds to pay UI benefits, as was the case for New Jersey in 2011 and 2012, it may obtain loans from the federal government. If the loan is not repaid within a certain time period, wages paid in that state are subject to higher FUTA tax rates.

In 2011, as a result of the federal loan, the FUTA rate on New Jersey wages was 0.9% instead of 0.6% on wages up to $7,000. Since New Jersey has not repaid its loan from Uncle Sam in 2012; the rate increases from 0.9% to 1.2% retroactively as of January 1, 2012.

The important issue here is that payments so far in the first three quarters of 2012 were only required at the “standard” rate of 0.6%. The difference between 1.2% and the 0.6% that was actually paid plus the fourth quarter at 1.2% is due January 31, 2013 for all of 2012. If you remember getting hit with a large FUTA deposit requirement in January 2012, the 2013 hit will be double since last year you paid for a 0.3% increase over the “standard” rate and in 2012 you are paying a 0.6% increase over the “standard” rate.

This increase should be taken into consideration by businesses in which labor is a major component of cost of goods sold, such as staffing agencies and construction companies, when doing year end budgeting. Make sure you account for this tax payment in your January 2013 cash flow considerations.

 Unless NJ repays the loan in 2013, the penalty tax will increase again to 0.9% for 2013. You might want to budget for this in your April, July and October 2013 FUTA payments.






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