Through this blog, I just want you to help to about how to calculate FUTA and SUTA
And for more information on this, you can Always get in touch with IRS
This study si based on the State Of Georgia
FUTA
. FUTA rate is=6.0% for first $7000 of gross wages for each employee per year.
. 5.4% credit against FUTA is allowed for SUTA taxes
. So the experience rating allows employer to pay lower than 5.4%
. So, therefore, net FUTA rate will be=0.6%
It's very simple calculation
6.0%-5.4%=.6%/.006% so it’s the same thing.
Most employer if they are paying their SUTA Taxes on time in full so they only have to
only pay 0.6% on $7000 wages.
So now let me describe Credits Against FUTA Tax
About getting full 5.4% credit you have to make SUTA contribution on a timely basis.
When I say timely basis .that means on or before the due date for filing.
So one more thing you want to keep in mind even if you being employer pays more than one fund, Still
credit limit would remain 5.4%.
So the least amount of SUTA tax you ever pay is .6%.
But each stat has its own Tax rate so as an employer may be yours have the different rate as compared to your neighbour state.
FUTA
. FUTA rate is=6.0% for first $7000 of gross wages for each employee per year.
. 5.4% credit against FUTA is allowed for SUTA taxes
. So the experience rating allows employer to pay lower than 5.4%
. So, therefore, net FUTA rate will be=0.6%
It's very simple calculation
6.0%-5.4%=.6%/.006% so it’s the same thing.
Most employer if they are paying their SUTA Taxes on time in full so they only have to
only pay 0.6% on $7000 wages.
So now let me describe Credits Against FUTA Tax
To get full 5.4% credit you have to make SUTA contribution on a timely basis.
When I say timely basis .that means on or before the due date for filing.
So one more thing you want to keep in mind even if you being employer pays more than one fund, Still
credit limit would remain 5.4%.
So the least amount of SUTA tax you ever pay is .6%.
But each stat has its own Tax rate so as an employer may be yours have a different rate as compared to your neighbour state.
There is one other way that your credit might not be 5.4%.
That’s when your state is fall under Title XLL Advances. Some state in the last couple of year there has been more unemployed people
Georgia is one on them. They had to go to the federal government and ask for a loan, That’s what we call title Xll title where the state goes to the federal government
and ask for a loan. SO they can pay out unemployment benefits to their unemployed workers. So this is a loan which stat has to pay back with interest if they have not paid back by the beginning of the second year
after the advance. For example, let think Georgia got an advance in 2011 and so they have to pay off that loan by the start of 2013.If they don't so all of their employer credit is going to reduce 0.35 instead of 5.4%
SUTA Laws& Rate
So in the month of November, you will find out that your tax pays out or not.
So as I mention Before each state has its own tax rate, And how you would know when Georgia Dept. of labour going to send you what your SUTA rate is.
So they always send out that report in fourth Quarter of before calendar year and that rate will be based on Experience.
That means if you Experience is bad you rate going to be lower, And if your Experience is worst you rates going to be higher.
And if you are new employer your Rates going to be specific, I think of Wright now rates are 2.62%.
Nonprofits have the option to reimburse the state for the actual amount of unemployment benefits paid instead of paying a percentage.
What does it mean is Nonprofits and some government workers instead of paying .6% or certain rates for SUTA.What will they do is will sent heir wage report to Georgia Department of Labour
So if Georgia Dept of Labour ever has to send out or pay their workers they will actually invoice those nonprofits for the amount they have to pay out to unemployed people. And then it's up to the non-profited from paying that bill.
for Georgia Dept Of Labour. So this option is only applicable for nonprofits and some government workers.
SUTA Dumping Prevention Act:
So what does it mean is if any Company is paying higher SUTA then they Factiously attempt to close their business so that rather than Paying high SUTA they will pay 2.62%.
So this act stops those companies to doing that. So according to this Act you can just do that for low SUTA rate.
What is Experience Rating?
That how SUTA rate gets assign to the employer, this has Reserve-Ratio formula.
And how its get calculated You take Contribution-Benefits Paid Divided by Avg.Payroll .
So here Contribution is all the SUTA Taxes That you have paid on time and in full,
Benefits Paid are that you have paid to unemployment workers And that Divide by Avg.Payroll
So if you’re Contribution are Higher and you Benefits paid are lower then you going to have Lower SUTA rate.
And has built a balance in reserve.
On the other hand if, My Contributions are lower and Benefits are higher than I am going to have a negative balance,So I am going to have higher SUTA rate.
To get you rates down what you can do is just make voluntary contributions to the stats funds this can increase you reserve account and help you to bring down your SUTA rate lower.
But this tax is not limited to Employer but some states require employees to contribute like Alaska.
Unemployment Tax Problems
1. In September 2014, Mason paint Corporation started operations in a state that requires
new employers of one or more individuals to pay a state unemployment tax of 3.5% of the first $7000 of wages paid each employee.
An analysis of the company’s payroll for the year shows total wages paid of $177,610.
The salaries of the president and the vice president of the company were $20,000 and
$15,000, respectively, for the four months. Included in the total wages were
$900 paid to a director who only attended director meeting during the year,$6,300 paid to
the factory superintendent and $2,000 in employee contribution to a cafeteria plan made on
a pre-tax basis -both federal and state.
In addition to total wages of $177,610, a payment of $2,430 they were made to Kim.
Accounting Company for an audit it performed on the company's books in December.
Compute the Net FUTA Tax and the SUTA Tax.
So calculation Should be-Both presidents Earning=20,000+15,000=35,000 so for both wages start from $7,000 so 35,000-14,000=21,000 (over cap) So now total paid wages are $177,610-$21,000 another thing is there is board of director as well so any body
as board of director is not Taxable .So 177,610-21,000-900-2000=153,710 FUTA Tax should be 153,710X.006=922.26
Now to SUTA will be=153.710 X 3.5%=5379.85
And for more follow this video this going to help you in better way
https://community.intuit.com/users/5118390-mightywarner
