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


 

LIKE SurfKY on Facebook - Click here to LIKE us now.

© 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 on social media.

Posted on 2/2/14
3/13 - 16
1 DOW 18,070.40
+46.34 (0.26%)    
2 S&P 2,114.49
+6.20 (0.29%)    
3 NASDAQ 5,016.93
+11.54 (0.23%)    
3/13 - 16

Most Read This Week

April 28, 2015 4184

Search for Stolen Vehicle Ends with Woman Charged…

by SurfKY News
April 27, 2015 3518

Online Petition Seeking Re­opening of Shanice…

by Samantha Carver, SurfKY News
April 28, 2015 3358

Man Charged with Stalking Smoke Shop Clerk

by MPD
April 27, 2015 2912

Hopkins County Drug War ― Are We Winning?

by Doreen Dennis, SurfKY News
April 30, 2015 2819

Family Says 'Goodbye' to Dog After It Allegedly…

by Doreen Dennis, SurfKY News

Most Read This Month

April 17, 2015 15559

An Open Letter from an Addict

by Olivia Kirks
April 23, 2015 8491

Man Charged with Sodomy, Incest/Victim under 12

by SurfKY News

Stories Trending Now

May 03, 2015 1458

Two Injured During Two-Vehicle Collision

by SurfKY News
May 04, 2015 1409

Teen Injured During Collision with Police Cruiser

by SurfKY News
May 04, 2015 1292

Alleged Littering Leads to Drug Arrest

by SurfKY News
May 03, 2015 1141

Faith Baptist Hosts Family Fun Day

by Tammy Holloway, SurfKY News
May 04, 2015 905

Three Injured in Two-Vehicle Collision

by SurfKY News
May 03, 2015 770

Dave Says - May 3, 2015

by Dave Ramsey
May 03, 2015 708

2015 Correctional Employees' Week Celebrated…

by Michael Caudill
May 02, 2015 670

Conquering the clutter: Cleanliness with kids is…

by SurfKY News
May 02, 2015 662

Baptist Health Hosts Annual ‘Bike Safety Day’

by Gary Gates, SurfKY News