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Unemployment Compensation Benefits Programs

Unemployment Compensation Benefits Programs

  • October 23rd, 2014
  • jrhassociates
  • Comments Off on Unemployment Compensation Benefits Programs

Funding for unemployment compensation benefits programs come from taxes imposed upon employers on both federal and state levels. There are many factors that come into play when determining the amount that an employer is required to pay in unemployment taxes. Some of these factors include the total of the company’s annual payroll, the age and industry of the business, and the number of unemployment claims that have been filed against the company.

Unemployment compensation benefits programs exist to support workers who lose their jobs, by no fault of their own, while they find new jobs. They’re separately maintained by federal and state agencies, and as such, employers are required to pay separate taxes, imposed by the Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA).

FUTA requires employers to pay an additional payroll tax that is based on the amount of money they pay their employees. Unemployment taxes differ from other payroll taxes in that they are only paid by the employer, and not by the employee. FUTA taxes are never withheld from an employee’s pay.

Does Your Company Need to Pay Into Federal Unemployment Compensation Benefits Programs?

There are two ways to determine if your business is required to pay the FUTA tax. If either of the following is true for your business for the current or previous calendar year, you’re responsible for paying the FUTA tax:

  1. You paid at least $1,500 in total payroll for any calendar quarter; or
  2. You had at least one employee on any day in each of 20 different calendar weeks (The weeks needn’t be consecutive, and the employee needn’t be the same individual. Ex: in 2013, ABC Company had Elsa work on Mondays during the summer months [June-August] and had Cindy work on Wednesdays during the winter months [December-February]. In total, that’s 13 consecutive summer weeks, and then 13 consecutive winter weeks, for a total of 26 weeks, between two employees.)

Businesses that are liable for the FUTA tax because they meet either of the aforementioned criteria are thusly responsible for paying the FUTA tax for that calendar year as well as the following calendar year.

Check back with us next week for information on how to compute federal taxes for unemployment compensation benefits programs. If you have more tax-related questions, contact the professionals at JRH & Associates today at (516) 794-5752!


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