Vision Payroll

November 27, 2011

IRS Revamps Schedule A for 2011

IRS Revamps Schedule A for 2011
IRS Revamps Schedule A for 2011
The Internal Revenue Service (IRS) has issued a revamped Schedule A for Form 940 for 2011. The revised Schedule A includes a line for every state as well as the District of Columbia, Puerto Rico, and the US Virgin Islands.

Revamped Form Necessitated by Increase in Number of Credit Reduction States

A revision to Schedule A was required since the number of states and territories subject to a credit reduction increased from three in 2010 to twenty-one in 2011.

Each State Is Listed with the Relevant Rate

The individual lines for each state, DC, PR and VI are listed with the applicable credit reduction rate. Taxpayers should simply enter the wages paid in each state and multiply by that state’s rate. Wages should be entered even for states that have a zero credit reduction rate.

Not All Taxpayers Must File Schedule A

Not every taxpayer that is required to file Form 940 is required to file Schedule A. Taxpayers that pay wages in more than one state or taxpayers that pay wages in a credit reduction state must complete and file Schedule A. Taxpayers that pay wages only in a single state that is not a credit reduction state need not complete or file Schedule A.

Rely on Vision Payroll for Your Schedule A

Vision Payroll will complete and electronically file Schedule A for all tax pay and file clients. Employers will be able to download a copy of Schedule A for their records.

November 26, 2011

IRS Releases 2011 Form 940

US Virgin Islands and Twenty States Have a Credit Reduction in 2011
US Virgin Islands and Twenty States Have a Credit Reduction in 2011
The Internal Revenue Service (IRS) has released the 2011 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and accompanying instructions. Employers use Form 940 to report their annual Federal Unemployment Tax Act (FUTA) tax.

Twenty Credit Reduction States for 2011

There are twenty credit reduction states for 2011: Michigan, Indiana, Arkansas, California, Connecticut, Florida, Georgia, Illinois, Kentucky, Minnesota, Missouri, North Carolina, New Jersey, Nevada, New York, Ohio, Pennsylvania, Rhode Island, Virginia, and Wisconsin as well as the US Virgin Islands. The credit reduction for most Michigan employers is 0.9% and for most Indiana employers it’s 0.6%. Most employers in the other credit reduction states and the US Virgin Islands have a credit reduction of 0.3%.

2011 FUTA Rate Decreased as of July 1, 2011

The FUTA tax rate decreased to 6.0% (before SUTA credits) on July 1, 2011. The rate for the first six months of 2011 was 6.2%. Under current law, the rate will remain at 6.0% throughout 2012. The 2011 Form 940 contains lines to report wages paid before July 1, 2011 and wages paid after June 30, 2011.

Vision Payroll to File Form 940 Electronically

Vision Payroll will file Form 940 for its clients electronically with the IRS and will not submit the paper version. Employers will be able to download a copy of Form 940 for their records.

August 7, 2011

Michigan Offers Rebate for Expected Credit Reduction

Steven Hilfinger, Director, Michigan Department of Licensing and Regulatory Affairs
Steven Hilfinger, Director, Michigan Department of Licensing and Regulatory Affairs
According to the Unemployment Insurance Agency (UIA) of the State of Michigan Department of Licensing and Regulatory Affairs in Fact Sheet 139, the FUTA tax credit reduction rate will increase from 0.6% in 2010 to 0.9% in 2011. Since the determination will not be made until November 1, 2011, this is only a projection at this time.

Standard Credit Rate is 5.4% for 2011

Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940.

Employers in Certain States Are Subject To Credit Reduction

Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

Michigan Is Subject To Credit Reduction for Third Consecutive Year

Since Michigan was already subject to a credit reduction in 2009 and 2010, the credit reduction will increase to 0.9% for 2011. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 1.2% in 2012, 1.5% in 2013, etc.

Rebate Offered To Fully Experienced Employers with a Positive Balance

Fully experienced employers with a positive balance may claim a credit using Form UIA 1110. The credit is the lower of 50% of the additional tax paid due to the credit reduction or the taxable wages for the year of the credit reduction multiplied by the employer’s Nonchargeable Benefits Component (NBC). Based on the eligibility conditions for prior years, the expected eligibility conditions for a 2012 tax credit should be as follows:

  1. Your “actual reserve” balance as of June 30, 2010 as shown on your 2011 annual tax rate determination must be positive. If the “actual reserve” is a negative figure, refer to Voluntary Payment information at www.michigan.gov/uia.
  2. In 2011, you are in your fifth or subsequent year of coverage with the UIA (you are a fully experienced employer).
  3. You pay the 2011 FUTA credit reduction to the Internal Revenue Service prior to January 1, 2013.
  4. You certify on Form UIA 1110 the amount of additional FUTA tax you paid for 2011 as a result of the credit reduction.
  5. You have taxable wages with UIA in the 2011 calendar year.

Vision Payroll Will Calculate the Credit Reduction for All Michigan Clients

Contact Vision Payroll if you have any further questions on the Michigan credit reduction.

June 29, 2011

Tip of the Week: FUTA Tax to Decrease This Friday

Filed under: News — Tags: , , , , , , — Vision @ 5:18 pm
Tip of the Week: FUTA Tax to Decrease This Friday
Tip of the Week: FUTA Tax to Decrease This Friday
Most employers nationwide will receive an employment tax reduction July 1, 2011 when the temporary FUTA surtax expires. The temporary surtax was enacted in 1976. The standard FUTA tax rate will decrease from 6.2% to 6.0%.

Standard Credit Rate is 5.4% for 2011

Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940. Therefore, for 2011, many employers will pay an effective rate of 0.8% for wages paid from January 1, 2011 to June 30, 2011 and 0.6% for wages paid from July 1, 2011 to December 31, 2011.

FUTA Wage Base is $7,000 for 2011

The FUTA wage base for 2011 is $7,000. Since many employees have already been paid $7,000 in wages during 2011, no reduced tax will apply for those employees.

Credit Reduction Will Apply in Some States

Unless Congress changes the law, as many as thirty-eight states could be credit reduction states in 2011. Michigan would have a credit reduction of 0.9%, Indiana and South Carolina would have credit reductions of 0.6%, and all other states would have credit reductions of 0.3%. If these states are determined to be credit reduction states in November, the effective rates for the second half of 2011 would be 1.5% for Michigan employers, 1.2% for Indiana and South Carolina employers, and 0.9% for all other credit reduction state employers.

Vision Payroll Will Calculate the Appreciate FUTA Tax for All Employers

Employers in every state can contact Vision Payroll for assistance in determining their FUTA tax rate for 2011 and for assistance in filing Form 940.

December 18, 2010

IRS Releases 2010 Form 940

On 2010 Form 940, Michigan Is One of Three Credit Reduction States
On 2010 Form 940, Michigan Is One of Three Credit Reduction States
The Internal Revenue Service (IRS) has released the 2010 Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return, and accompanying instructions. Employers use Form 940 to report their annual Federal Unemployment Tax Act (FUTA) tax.

FUTA Tax Must Be Deposited Electronically Using EFTPS in 2011

As previously announced, the IRS will discontinue accepting paper coupons for depository taxes after December 31, 2010. Employers should make their deposits electronically using Electronic Federal Tax Payment System (EFTPS).

Three Credit Reduction States for 2010

There are three credit reduction states for 2010: Michigan, Indiana, and South Carolina. The effective FUTA rate for most Michigan employers is 1.4% and for most Indiana and South Carolina employers it’s 1.1%. Most other employers have an effective rate of 0.8%.

2011 FUTA Rate Scheduled to Decrease

Under current law, the FUTA tax rate is scheduled to decrease to 6.0% (before SUTA credits) on July 1, 2011. The rate for the first six months of 2011 is 6.2%.

Vision Payroll to File Form 940 Electronically

Vision Payroll will file Form 940 for its clients electronically with the IRS and will not submit the paper version. Employers will be able to download a copy of Form 940 for their records.

November 28, 2010

Indiana Is a Credit Reduction State for 2010

Filed under: News — Tags: , , , , — Vision @ 5:40 pm
Mark W. Everson, Commissioner, Indiana Department of Workforce Development
Mark W. Everson, Commissioner, Indiana Department of Workforce Development
According to the Indiana Department of Workforce Development, Indiana will be a FUTA tax credit reduction state in 2010.

Standard Credit Rate is 5.4% for 2010

Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940.

FUTA Wage Base is $7,000 for 2010

Since the FUTA wage base is $7,000 for 2010, a maximum tax of $56 per employee is due, calculated as follows:

FUTA Taxable Wage Base
FUTA Taxable Wage Base$7,000
FUTA Tax Rate6.2%
Maximum FUTA Tax per Employee Before Credit $434.00$434
Less: FUTA Tax Credit Reduction ($7,000 X 5.4%)$378
Maximum Net FUTA Tax per Employee$56

Employers in Certain States Are Subject To Credit Reduction

Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

Indiana Is Subject To Credit Reduction for First Time

Since Indiana was not a credit reduction state in 2009, the credit reduction rate will be 0.3% for 2010. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 0.6% in 2011, 0.9% in 2012, etc. Adding the credit reduction rate of 0.3% to the normal rate of 0.8% results in an effective FUTA rate of 1.1% for Indiana employers in 2010.

Vision Payroll Will Calculate the Credit Reduction for All Indiana Clients

Contact Vision Payroll if you have any further questions on the Indiana credit reduction.

November 19, 2010

Question of the Week: Are There Any Other Credit Reduction States for 2010?

Filed under: News — Tags: , , , , , — Vision @ 3:12 pm

Governor Mark Sanford, Courtesy of South Carolina Governor's Office
Governor Mark Sanford, Courtesy of South Carolina Governor's Office
This week’s question comes from Peter, a company controller. I read that Michigan is a credit reduction state for 2010. Are there any other credit reduction states for 2010? Answer: Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

South Carolina and Michigan Are the Credit Reduction States for 2010

In addition to Michigan, the South Carolina Department of Employment and Workforce has announced that South Carolina is also a FUTA credit reduction state for 2010.

Maximum Tax Increase Is $21 per Employee

Since this is South Carolina’s first year as a credit reduction state, the credit reduction will be 0.3% or a maximum of $21 per employee. This is calculated by multiplying the wage base of $7,000 by the credit reduction of 0.3%.

Michigan, South Carolina and Indiana Are Credit Reduction States for 2010

As noted elsewhere and in the comments, the three credit reduction states for 2010 are Michigan, South Carolina, and Indiana. Unless Congress changes the rules or states make significant changes, as many as thirty-eight states may be credit reduction states in 2011.

Vision Payroll Will Calculate the Credit Reduction for All South Carolina Clients

Contact Vision Payroll if you have any further questions on the South Carolina credit reduction.

November 16, 2010

Michigan FUTA Tax Credit Reduction to Increase for 2010

Filed under: News — Tags: , , , , — Vision @ 6:44 pm

Andrew S. Levin, Acting Director, Michigan Department of Energy, Labor & Economic Growth
Andrew S. Levin, Acting Director, Michigan Department of Energy, Labor & Economic Growth
According to the Unemployment Insurance Agency of the State of Michigan Department of Energy, Labor & Economic Growth, the FUTA tax credit reduction rate will increase from 0.3% in 2009 to 0.6% in 2010.

Standard Credit Rate is 5.4% for 2010

Generally, employers who pay their state unemployment tax by the due date for filing Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return receive a credit 5.4% against their Federal Unemployment Tax Act (FUTA) tax. This credit is claimed on Form 940.

FUTA Wage Base is $7,000 for 2010

Since the FUTA wage base is $7,000 for 2010, a maximum tax of $56 per employee is due, calculated as follows:

FUTA Taxable Wage Base
FUTA Taxable Wage Base$7,000
FUTA Tax Rate6.2%
Maximum FUTA Tax per Employee Before Credit $434.00$434
Less: FUTA Tax Credit Reduction ($7,000 X 5.4%)$378
Maximum Net FUTA Tax per Employee$56

Employers in Certain States Are Subject To Credit Reduction

Federal law provides for a reduction in the FUTA tax credit when a state has outstanding federal loans for two years. The credit reduction is calculated on Schedule A of Form 940.

Michigan Is Subject To Credit Reduction for Second Consecutive Year

Since Michigan was already subject to a credit reduction in 2009 of 0.3%, the credit reduction will increase to 0.6% for 2010. The credit reduction will continue to increase by 0.3 percentage points each year until the loan is paid, e.g., 0.9% in 2011, 1.2% in 2012, etc.

Vision Payroll Will Calculate the Credit Reduction for All Michigan Clients

Contact Vision Payroll if you have any further questions on the Michigan credit reduction.

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