Kentucky employers will be subject to higher federal unemployment (FUTA) for 2014.
Employers pay FUTA tax at a rate of 6.0% on an employee’s first $7,000 of wages. The tax is usually offset by a credit up to 5.4% for amounts paid to your state unemployment fund; thus resulting in a normal net tax rate of .6% for FUTA purposes.
States are allowed under the Social Security Act to borrow funds from the federal government to pay unemployment benefits if their state funds run short. If the state is unable to pay back the loan, the FUTA credit the employers in that state are allowed is reduced below the 5.4% referred to above. The credit reduction is .3% for each year the loan is not repaid.
Kentucky along with California, New York, North Carolina, Ohio and the Virgin Islands are now subject to a 1.2% credit reduction on their 2014 FUTA tax due to the fact they have been unable to repay their federal loans for five years. Indiana is subject to 1.5% credit reduction and Connecticut 1.7% due to their lower state unemployment rates not fulfilling the normal FUTA credit.
Please call our office if you need any help with your upcoming annual payroll returns in January.
posted by Lisa DeVaughn Foley, CPA, CGMA