Unemployment Tax Update from Corporate Cost Control

ARKANSAS employers will be assessed a 0.2% Advance Interest Tax beginning April 1, 2011.  The additional tax will not be shown as a separate item but will be added to the existing unemployment tax rate for all employers.  The assessment will remain in effect until the quarter after Arkansas repays the federal loans and interest owed.  The assessment cannot be used when calculating the FUTA creditable taxes.  Arkansas has confirmed that the FUTA tax credit of 0.3% will be lost for employers when the final Form 940 is filed January 31, 2012.  

ILLINOIS  will be diverting 0.5% of each employer’s contributions to the interest on the Title XII loan.  Legislation has been passed to increase the 2012 taxable wage base to $13,560 (up from $12,740 for 2011).  If the trust fund is not replenished, the higher taxable wage base will remain in effect for 2013.  Illinois is hopeful to collect enough money to satisfy the federal loan by the November deadline. 

MISSOURI  will be sending out an additional assessment for the second quarter of 2011 which will be due July 31, 2011.  The assessment is multiplied by the employer’s 2010 calendar year taxable payroll and is paid on line 8 of the quarterly contribution return. 

MICHIGAN employers lost their FUTA tax credit for the second year and do not have plans of repaying the amount by the November 10th deadline in 2011.  Michigan is assessing all negative balanced employers up to 0.75% to satisfy the interest due on the Title XII loans.  The determined assessment is added to each negative balanced employer’s tax rate.  The assessment is not creditable when completing the Federal Form 940.  Michigan will provide a credit to all employers who meet the criteria covered in a subsequent Unemployment Tax Update.  

 Four States Attempt Recovery

Four states have taken action to recover their unemployment trust funds by reducing benefits.  ARKANSAS will reduce unemployment benefits from 26 weeks to 25 weeks through the passage of SB 592, Act 861.  ILLINOIS has also reduced their benefit weeks from 26 to 25 weeks. MISSOURI has reduced their benefit weeks from 26 weeks to 20 weeks (HB 163) and reduced the benefits payable to each claimant. MICHIGAN has also reduced their benefit weeks from 26 to 20 weeks.  

Some federal lawmakers disagree with this action and will probably be one of the debates addressed by Congress as an attempt to enact new unemployment legislation to begin reforming unemployment as the program stands today.  Federal lawmakers want to continue the benefits of claimants and are trying to pass legislation that will reduce the strain now being placed on state unemployment trust funds.  HR 650 and S. 386 introduced by the President’s 2012 Budget Plan would waive the interest on the Title XII loans and the FUTA credit reduction for two years in exchange for a higher FUTA taxable wage base of $15,000.  The FUTA tax rate would be reduced in 2014 in exchange for the waiver.  Both bills are being considered in the chamber committees.

If you have any questions, please contact me at ngreen@corporatecostcontrol.com or (800) 207- 6926 ext.418.

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