As far as titles go, I know this one isn’t too catchy. I mean, we all know the taxman’s coming. He always is. What else is new? Nothing yet, but if President Obama’s proposed fiscal year 2016 budget goes through unscathed, a lot may be new according to Thomas and Thorngren.
How the Budget Would Affect Your Unemployment Taxes
As an employer, you’ve been paying unemployment taxes (as have your employees). You’ve been paying 0.6% on the first $7,000 of employees’ income for your federal unemployment taxes (FUTA). Your state unemployment (SUTA) varies from state to state, and is based on different income levels. If the President has his way, there will be a lot more uniformity.
In 2016, the budget proposes an increase from 0.6% to 0.8%, effectively raising every employer’s FUTA by $14 per employee. Not too big a deal, right? The big deal happens in 2017 when the Federal Government would lower the rate from 0.8% to 0.165%. Sounds great, but here’s the catch: The FUTA taxable wage limit will go from $7,000 per employee per year to $40,000 per employee per year. That calculates to $66 per employee per year or a 57% increase over what you’re currently paying.
Here’s the real kicker. The Federal Government will then mandate that every state raise their taxable wage limit to $40,000 per employee per year. Here in Ohio, the current taxable wage limit is $9,000. In fact, all but two states, Hawaii and Washington, would see their limits increase, some very significantly.
Obviously, most states will adjust their rates accordingly so as not to become too large a burden on businesses, but what that number ends up being is anyone’s guess. Are you prepared for this massive increase? Even if this doesn’t go through, wouldn’t it make sense to get a hold of your unemployment costs now and try to get them to as low a level as possible? If you’re like most small business owners, you’re thinking that unemployment costs are what they are and there’s nothing you can do about it. Like a lot of other business owners, you may be wrong.
Preparing Your Business with a PEO
There are ways to control these costs. One is to never lay off or fire anyone. If that’s not probable, you may want to consider working with a Professional Employer Organization. Contact us today to see how partnering with a PEO can benefit you and your business.