I have payroll in multiple states. Several of those states have FUTA Credit Reductions. I need to calculate more FUTA for employees in those states. What is best practice for this? Modify the individual employees' records for FED4 in Employee Maintenance? Or some other option?
J.,
Thanks for the explanation. I do not have any clients in those states so that is probably why I was not following what you were asking.
One thought would be to set up multiple FUTA deductions (one for each state) and do not make them subject to all work locations. You can then set up work locations for each of these states and drop the appropriate FUTA deduction under that work location. This approach may not work if you have local taxes to deal with that are dependent on work location.
Correct - additional FUTA tax is owed.
Normally FUTA is 6.0%. Each state typically allows a credit against the FUTA of 5.4% - making the normal effective FUTA rate 0.6%. Calculated on the first $7,000 of wages, that brings the employer FUTA liability to $42.00.
Some states borrowed from Federal to cover their unemployment expenses during the recession. Any state that has not paid back that loan within a certain timeframe must reduce their FUTA credit - the basic effect is that Federal is cutting the state out of the repayment scheme and getting the money directly from the employers in the state. That credit reduction increases each year the loan is outstanding. California, Connecticut, Indiana, Kentucky, New York, North Carolina and Ohio are the affected states for 2014. Those states' credit reductions run from 1.2% to 1.7% - making the new effective FUTA rate in those states 1.8% to 2.3%.
What I wanted to know is if anyone has come up with an efficient way to handle this?
J.,
I have clients in several states running SL payroll and have not encountered what you are saying here so I am wondering, like Elaine, if, perhaps, you are saying it backwards. The FUTA (Federal Unemployment) rate is reduced when SUTA (State Unemployment) is also paid on the employee so my experience is the FUTA rate is reduced, not increased when SUTA is involved. I am wondering if your FUTA rate already reflects that reduction but you have employees working in a state where SUTA is not involved so you need the full FUTA rate for those employees. Before attempting to address this question further, is what I just said the case?
Hi J.
I am not familiar when you say that states have credit reductions. It sounds like more tax is owed.
When you have a fixed percent deduction, SL stops calculating only when the max wages times the % deduction amt has been withheld. So if the withholding % increase, the system will start calculation the tax again.
Most of the time you don't want this to happen. In ver 2015, you have an option on the Deduction Maintenance screen saying whether or not this should happen. Very nice.
I would need to hear more about why there was a reduction earlier and how that was implemented to suggest a way to fix it.
If it is just for some employees, then you could possibly make an adjustment in Employee Maintenance>Deduction tab.
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