Wednesday, January 28, 2015
Davis Motor Sales banner ad
Posted on 2/2/14

tax increase

FRANKFORT, Ky. (1/30/13) - Since 2010, Kentucky employers have been hit with a 50% increase in Federal Unemployment Tax Act (FUTA) taxes.  The increase is because Kentucky has taken loans from the federal government to meet its state unemployment benefits liabilities and has not repaid the loans within the allowable time frames.  The effective FUTA rate has increased from .8 percent of the first $7,000 of wages paid to each employee ($56 each max) to 1.2 percent of first $7,000 wages paid ($84 each max).  For 2013 the tax will increase to 1.5 percent and continue to increase .3 percent each year until Kentucky’s Unemployment Trust Fund is back in the black.  When that happens, a 5.4% credit can be applied giving a .6% effective FUTA rate for Kentucky employers.  Unfortunately the feds have until November to decide what the rate for that year will be.  Employers should budget for the higher rate.

What is very confusing for Kentucky employers is that this is referred to as a “credit reduction”.  Each state operates under the FUTA rules and when states are in compliance with FUTA and owe no money, credits are given, therefore reducing the 6.0 percent FUTA tax.  Because the Kentucky Trust Fund was in the black and in compliance, credits reduced the effective rate to .8% for many years.  In 2010 the credit was increased to 5.4% leaving an effective .6% FUTA rate for employers.  Now, the credits for Kentucky are being taken back by the feds until the Trust Fund is restored.  Adding to the confusion is that the Social Security match paid by employers is 6.2%

Employers pay State Unemployment (SUTA) and FUTA taxes on what is called the “taxable base”.  The FUTA taxable base remains at $7,000; but, the SUTA base for Kentucky in 2012 increased to $9,000 from $8,000 where it had been for many years.  Furthermore, the taxable base will increase $300 each year until 2022.  So SUTA taxes increased 12.5 percent in 2012 and will increase 3.75% (calculated from $8,000) each year until 2022.  The total dollars increase for each employer varies based on that employer’s tax rate which is calculated on several variables including claims against that employers reserve account.

The SUTA rate changes are the result of a task force created by Governor Beshear in 2009 to address the huge shortfall in the trust fund.  The task force reported in January 2010 with 17 specific recommendations to return the fund to solvency.  Those recommendations were quickly addressed by the Kentucky General Assembly and signed into law by Governor Beshear.  

Ron Sanders
SurfKY News


 

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story by using one of the social media links below.

2/6/2014 - posted
3/13 - 16
Started 11/8/2013
Started 11/8/2013
1 DOW 17,387.21
-291.49 (-1.65%)    
2 S&P 2,029.55
-27.54 (-1.34%)    
3 NASDAQ 4,681.50
-90.27 (-1.89%)    
2/6/2014 - posted
3/13 - 16
Started 11/8/2013
Started 11/8/2013

Most Read This Week

January 23, 2015 9260

Local Church's Faith Restored; 71 Souls Saved…

in Video by Gary Gates, SurfKY News
January 22, 2015 7347

Nortonville Man Accused of Selling Drugs near…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 21, 2015 6689

KYDOT Pre-Treating Roads Thursday in Antipation…

in Top News For All Sites by Keith Todd
January 22, 2015 6295

MCEA Head: Further School Mergers Might Ease…

in Local (Muhlenberg) Top News by Paul McRee, SurfKY News
January 23, 2015 5822

Parents Face Charges after Marijuana Joint Falls…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 25, 2015 5440

Dean’s List Announced

in Top News For All Sites Touching Hopkins by Joyce Riggs
January 21, 2015 4991

Man Arrested after Allegedly Nodding off on Baby…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 26, 2015 4968

KSP Arrests Two on Child Porn Charges; MPD…

in Top News For All Sites Touching Hopkins by Trooper Stu Recke

Most Read This Month

January 08, 2015 20811

Woman Claiming to be 'Lady Gaga' Tours Town in…

in Top News For All Sites by Madisonville Police Department
January 15, 2015 20614

UPDATE: Fatality Victim's Name Officially Released

in Top News For All Sites by Doreen Dennis, SurfKY News

Stories Trending Today

January 26, 2015 4968

KSP Arrests Two on Child Porn Charges; MPD…

in Top News For All Sites Touching Hopkins by Trooper Stu Recke
January 26, 2015 3565

Man Goes to Jail after Allegedly Attacking Family

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 25, 2015 3542

Juvenile Hit by Vehicle at McDonald's

in Local (Muhlenberg) Top News by GPD Officer Wes Miller
January 26, 2015 3106

School Board Votes 3-2 for Utility Tax

in Local (Muhlenberg) Top News by Charles W. Riley II, SurfKY News
January 26, 2015 2957

Madisonville Post Welcomes New Troopers

in Top News For All Sites Touching Hopkins by Trooper S. C. Recke
January 26, 2015 2690

Hopkins County Sheriff's Reports Released

in General News For All Sites by Hopkins County Sheriff's Office
January 26, 2015 2639

Madisonville Police Arrest Reports - Jan. 26, 2015

in Hopkins News by Madisonville Police Department
January 26, 2015 2462

Kentucky Highway Crews Prepared for Snow into the…

in Top News For All Sites by Keith Todd
January 27, 2015 2067

Hopkins County Grand Jury Indictments

in Local (Hopkins) Top News by Karen McKnight, Hopkins Circuit Clerk
January 26, 2015 2042

Hopkins District Court Fines Handed Down

in Local (Hopkins) Top News by Circuit Clerk's Office
January 26, 2015 2003

McClearn Remains Optimistic I-69 Signs up Between…

in Top News For All Sites Touching Hopkins by Keith Todd
January 26, 2015 1409

Dawson Springs Police Reports Released

in Hopkins News by Melissa Heflin