This week’s question comes from Rick, a corporate controller. We received a notification from our state unemployment agency that we may want to make a voluntary payment toward SUTA. Should we make a voluntary additional payment?

Answer: For employers that are in states that use a system that includes contributions made by employers in calculating the unemployment rate, it may be beneficial to make such a contribution. Many such states, but not all, allow employers to make voluntary contributions. Employers should estimate their taxable state unemployment wages for 2009 and multiply that by the difference between the higher rate and the lower rate. That sum should be compared to the required payment. The greater the sum is over the required payment, the more beneficial it is to make the voluntary payment.

For example, assume that taxable SUTA wages (not gross SUTA wages) will be $1,000,000 and that the employer’s rate will decrease by 0.15% if the voluntary payment is made. The estimated savings for 2009 would be $1,500 ($1,000,000 X 0.15%). Any payment greater than $1,500 would not be beneficial for 2009 since the cost would exceed the estimated benefit. Payments significantly less than $1,500 should almost always be made due to the anticipated savings for 2009. As the payment amount approaches $1,500 it becomes less valuable to make the payment because the required outlay must generally be made early in the year.

Voluntary payments are not allowed for FUTA purposes.

Contact Vision Payroll if you have any questions on voluntary additional SUTA payments.